Securities Laws
(Amendment) Act, 1999
[31 of 1999]
An Act further to amend the Securities Contracts
(Regulation) Act, 1956 and
the Securities and Exchange Board of India Act, 1992.
Be it
enacted by Parliament in the Fiftieth Year of the
1. Short
title and commencement.
(1) This Act
may be called the Securities Laws (Amendment) Act, 1999.
(2) It shall come
into force on such date as the Central Government may, by notification in the
Official Gazette, appoint.
2. Amendment of section 2.
In section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956) hereinafter referred to as the principal Act),—
(a) after clause (a), the following clause
shall be inserted, namely :—
‘(aa) “derivative” includes—
(A) a security derived from a debt instrument, share, loan
whether secured or unsecured, risk instrument or contract for differences or
any other form of security;
(B) a contract which derives its value from the prices, or index
of prices, of underlying
securities;’;
(b) in clause (h), after sub-clause (i), the following sub-clauses shall be inserted, namely:—
“(ia) derivative;
(ib) units or any other instrument issued by
any collective investment scheme to the investors in such schemes;”.
3. Insertion of new section 18A.
After section 18 of the principal Act, the following
section shall be inserted, namely:—
“18A. Contracts in derivative.—Notwithstanding anything contained in any other law for the time being in force,
contracts in derivative shall be legal
and valid if such contracts are—
(a) traded on a recognised stock
exchange;
(b) settled on the
clearing house of the recognised stock exchange, in accordance with the rules and bye-laws of such
stock exchange.”.
4. Amendment of
section 21.
In the
heading occurring above section 21 of the principal Act, the words “By Public
Companies” shall be omitted.
5. Amendment of
section 22.
In section
22 of the principal Act,—
(a) after the words “public company”, the words “or
collective investment scheme” shall
be inserted;
(b) after the word “company”, the words “or scheme” shall
be inserted.
6. Amendment of
section 23.
In section
23 of the principal Act, in sub-section (1), after clause (c), the following
clause shall be inserted, namely :—
“(d) enters into any contract in derivative in contravention of
section 18A or the rules made under section 30.”
7. Amendment of
section 24.
In section
24 of the principal Act, after sub-section (2) in the Explanation,
for sub-clause (b), the following sub-clause shall be substituted,
namely:—
‘(b) “director”,
in relation to—
(i) a firm, means
a partner in the firm;
(ii) any association of persons or a body of individuals, means
any member controlling the affairs thereof.’.
8. Insertion of
new section 27A.
After
section 27 of the principal Act, the following section shall be inserted,
namely:—
“27A. Right to receive income from collective
investment scheme.—(1) It shall be lawful for the holder of any
securities, being units or other instruments issued by the collective
investment scheme, whose name appears on the books of the collective investment
scheme issuing the said security to receive and retain any income in respect
of units or other instruments
issued by the collective investment scheme declared by the collective investment scheme in respect thereof for
any year, notwithstanding that the
said security, being units or other instruments issued by collective investment scheme, has already been transferred by
him for consideration, unless the
transferee who claims the income in respect
of units or other instruments issued by the collective investment scheme from the transfer or has lodged the security
and all other documents relating to the transfer which may be required by the collective investment scheme with the collective
investment scheme for being registered in his name within fifteen days of the
date on which the income in respect
of units or other instruments issued by the collective investment scheme became due.
Explanation.—The period specified in this section shall be extended—
(i) in case of death of the transferee, by
the actual period taken by his legal
representative to establish his claim to the income in respect of units or other instrument issued by collective
investment scheme;
(ii) in case of loss
of the transfer deed by theft or any other cause beyond the control
of the transferee, by the actual period taken for the replacement
thereof; and
(iii) in case of delay in the lodging of any security, being units
or other instruments issued by collective
investment scheme, and other documents
relating to the transfer due to causes connected with the post, by the
actual period of the delay.
(2) Nothing
contained in sub-section (1) shall affect—
(a) the right of a collective investment
scheme to pay any income from units or other instruments issued by
collective investment scheme which has become due to any person whose name
is for the time being registered in the books of the collective
investment scheme as the holder of the security being units or other
instruments issued by collective investment scheme in respect of which the
income in respect of units or other instruments issued by the collective scheme has become
due; or
(b) the right of transferee of any security,
being units or other instruments issued by the collective investment scheme,
to enforce against the transferor or any other person his rights, if
any, in relation to the transfer in any case where the company has
refused to register the transfer of the security being units or
other instruments issued by the collective investment scheme in the name of
the transferee.”
9. Substitution of
new section for section 29A.
For section
29A of the principal Act, the following section shall be substituted,
namely:—
“29A. Power to delegate.—The Central Government
may, by order published in the Official Gazette, direct that the powers
(except the power under section 30) exercisable by it under any
provision of this Act shall, in relation to such matters and subject to such
conditions, if any, as may be specified in the order, be exercisable also by
the Securities and Exchange Board of India or the Reserve Bank of India
constituted under section
3 of the Reserve Bank of India Act, 1934 (2 of 1934).”.
10. Amendment of section 30.
In section
30 of the principal Act, in sub-section (2), for clause (h), the following
clause shall be substituted, namely :—
“(h) the requirements which shall be complied with—
(A) by public
companies for the purpose of getting their securities listed on any stock
exchange;
(B) by collective
investment scheme for the purpose of getting their units listed on any stock
exchange;”
11. Amendment of Act 15 of 1992
In the
Securities and Exchange Board of
(i) in section 2, in sub-section (1), after clause (b), the
following clause shall be inserted, namely :—
‘(ba) “collective investment scheme” means any scheme or arrangement
which satisfies the conditions specified in section 11AA;’;
(ii) after section 11A, the following section shall be inserted,
namely:—
“11AA.Collective investment scheme.—
(1) Any scheme or arrangement which
satisfies the conditions referred to in sub-section (2) shall be a collective
investment scheme.
(2) Any scheme
or arrangement made or offered by any company under which,—
(i) the contributions, or payments made by
the investors, by whatever name called, are
pooled and utilized for the purposes of the scheme or arrangement;
(ii) the
contributions or payments are made to such scheme or arrangement
by the investors with a view to receive profits, income, produce or
property, whether movable or immovable from such scheme or arrangement;
(iii) the property, contribution or
investment forming part of scheme or arrangement,
whether identifiable or not, is managed on behalf of the investors;
(iv) the investors do
not have day to day control over the management and operation of the scheme or
arrangement.
(3) Notwithstanding
anything contained in sub-section (2), any scheme or
arrangement—
(i) made or
offered by a cooperative society registered under the Cooperative
Societies Act, 1912 (2 of 1912) or a society being a society registered or
deemed to be registered under any law relating to cooperative societies for the
time being in force in any State;
(ii) under which deposits are accepted by
non-banking financial companies as defined in clause (f) of section 45-I of the
Reserve Bank of India Act, 1934 (2 of 1934);
(iii) being a contract
of insurance to which the Insurance Act, 1938 (4 of 1938), applies;
(iv) providing for any Scheme, Pension Scheme
or the Insurance Scheme framed under the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 (19 of 1952);
(v) under which
deposits are accepted under section 58A of the Companies Act, 1956 (I of 1956);
(vi) under which
deposits are accepted by a company declared as a Nidhi or a mutual
benefit society under section 620A of the Companies Act, 1956 (1 of 1956);
(vii) falling within the meaning of Chit business as defined in
clause (d) of section 2 of the Chit Fund Act, 1982 (40 of 1982);
(viii) under which
contributions made are in the nature of subscription to a mutual
fund; shall not be a collective investment scheme.”.