Page 3 - Lesson Note 4

the second depository to commence operations and was promoted by the Bombay Stock

Exchange and the Bank of India.

Both these national level depositories operate through intermediaries who are electronically

connected to the depository and serve as contact points with the investors and are called

depository participants.

The depository participant (DP) serves as an intermediary between the investor and the
Depository (NSDL or CSDL) who is authorized to maintain the accounts of dematerialized

shares. Financial institutions, banks, clearing corporations, stock brokers and nonbanking

finance corporations are permitted to become depository participants. If the investor is buying
and selling the securities through the broker or the bank or a non-banking finance corporation,

it acts as a DP for the investor and completes the formalities.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The Securities and Exchange Board of India was established by the Government of India on 12

April 1988 as an interim administrative body to promote orderly and healthy growth of

securities market and for investor protection. It was to function under the overall

administrative control of the Ministry of Finance of the Government of India. The SEBI was
given a statutory status on 30 January 1992 through an ordinance. The ordinance was later

replaced by an Act of Parliament known as the Securities and Exchange Board of India Act,

1992.

Reasons for the Establishment of SEBI

The capital market has witnessed a tremendous growth during 1980’s, characterized
particularly by the increasing participation of the public. This ever expanding investors’

population and market capitalization led to a variety of malpractices on the part of companies,

brokers, merchant bankers, investment consultants and others involved in the securities

market.