SCRA 1956 and SCRR, 1957

SCRA 1956 and SCRR, 1957 (Part 1)

Definition: The Securities Contracts (Regulation) Act, 1956 (SCRA) is a law that regulates securities trading and stock exchanges in India. The Securities Contracts (Regulation) Rules, 1957 (SCRR) provide the rules and regulations for the implementation of SCRA.
Objectives: The main objectives of SCRA are to prevent undesirable transactions in securities, regulate contracts and transactions in securities, and provide a framework for the functioning of stock exchanges.

Regulatory Jurisdiction: The Central Government has regulatory jurisdiction over stock exchanges, contracts in securities, and listing of securities on stock exchanges.
Call for Periodical Returns: Every member of a recognized stock exchange must maintain and preserve books of accounts and other documents for a specified period.
Contracts as Principal: No member of a recognized stock exchange can enter into a contract as a principal with any person other than a member of a recognized stock exchange, unless they have secured the consent or authority of such person.
Penalties and Procedures: SCRA provides for penalties and procedures to be imposed upon any person or intermediary for non-compliance with the provisions of the Act.

Section 6(2): Requires every member of a recognized stock exchange to maintain and preserve books of accounts and other documents.
Section 6(3): Empowers SEBI to call for information or explanation from a recognized stock exchange or its members.
Section 15: Prohibits members of a recognized stock exchange from entering into contracts as a principal with any person other than a member of a recognized stock exchange.
Sections 23 to 26: Provide for penalties and procedures for non-compliance with the provisions of the Act.

Section 23: Imposes penalties for non-compliance with the provisions of the Act, including imprisonment and fines.
Section 23A: Imposes penalties for failure to furnish information or documents to SEBI or for furnishing false or incomplete information.
Section 23B: Imposes penalties for failure to enter into an agreement with a client.
Section 23C: Imposes penalties for failure to redress the grievances of an investor.
Section 23D: Imposes penalties for failure to segregate client securities or monies from own securities or funds.
Section 23E: Imposes penalties for failure to comply with listing conditions or delisting conditions.

Section 23JA: Provides for the settlement of proceedings initiated or to be initiated for alleged defaults.
Section 23JB: Provides for the recovery of penalties imposed under the Act.
Section 23JC: Provides for the liability of the legal representative of a person who has died.
Section 23L: Provides for the appeal against an order or decision of a recognized stock exchange or adjudicating officer.

Introduction to SCRA and SCRR: The Securities Contracts (Regulation) Act, 1956 (SCRA) and the Securities Contracts (Regulation) Rules, 1957 (SCRR) are crucial in regulating securities contracts and stock exchanges in India.
Key Provisions and Rules:
- Section 15HB of SEBI Act and Section 23D of SCRA: Empower SEBI to levy penalties for non-compliance.
- Section 23J of SCRA and Section 15-I of SEBI Act: Guide the factors to be considered when imposing penalties.
- Regulation 26 (xiii), (xv), and (xvi) of SEBI Stock Broker Regulations: Outline specific requirements for stockbrokers.
- Section 23A(a) of SCRA: Deals with penalties for non-compliance with corporate announcements.
- Rule 8 of SCRR: Specifies eligibility criteria for membership of a recognized stock exchange.
- Rule 9 of SCRR: Requires contracts between members to be confirmed in writing.
- Rule 12 of SCRR: Mandates the audit of accounts of members by a chartered accountant as required by SEBI.
- Rule 19A of SCRR: Stipulates the minimum public shareholding (MPS) requirement for listed companies.
- Rule 15 of SCRR: Requires members to maintain and preserve specific books of account and documents for a specified period.

Case 5.2: SEBI vs. Ashok Shivlal Rupani, Naresh Shivlal Rupani, and Uttam Ravji Gada: Highlights the importance of corporate announcements and the liability of directors for non-compliance.
Case 5.3: SEBI Settlement Order in Respect of Polson Limited: Illustrates the process of settlement and the importance of complying with the minimum public shareholding requirement.

The trading members of the stock exchanges are required to maintain the counterfoils or duplicates of contract notes issued to clients for 2 years.
Members of the stock exchanges are required to preserve books and accounts and other documents for a specific period of time as per the SCRA.
The statement that a stockbroker of a recognized stock exchange can enter into a contract in securities with another stockbroker after obtaining his consent is False.
The manner in which derivatives contracts and other contracts should be dealt with in the securities market is prescribed in the SCRA, 1956.