EQUITY PPT 2022

What is Indexation  Indexation is a simple method to determine t considering the effect of inflation. This can b can be found on the income tax website.  Let explain this with an example of a purcha Purchase value: Rs.100,000/- Year of purchase: 2005 Sale value: Rs 300,000 Year of sale: 2015 Long term capital gain: Rs 200,000/- Without indexation I would have to pay tax which works out to Rs 40,000/-. But we can reduce the LTCG by considering i

the true value from sale of an asset after be done with help of Cost inflation index (CII) which ase/sale of a debt mutual fund. of 20% on the capital gains of Rs 200,000/-, indexation

Financial Year CII Financial Year Before 1/4/1981 100 1996-97 150 1981-82 100 1997-98 1982-83 109 1998-99 1983-84 116 1999-00 1984-85 125 2000-01 1985-86 133 2001-02 1986-87 140 2002-03 1987-88 150 2003-04 1988-89 161 2004-05 1989-90 172 2005-06 1990-91 182 2006-07 1991-92 199 2007-08 1992-93 223 2008-09 1993-94 244 2009-10 1994-95 259 2010-11 1995-96 281 2011-12

CII Financial Year CII 305 2012-13 852 331 2013-14 939 351 2014-15 1024 389 406 2015-16 426 2016-17 447 2017-18 463 2018-19 480 2019-20 497 519 23 May 2022 551 582 632 711 www7.i8s5fm.co.in

Indexation Effect  Going back to the above example,  CII in the year of purchase (2005): 497 CII in the year of sale (2015): 1024 Indexed purchase value = Purchase value * (CII for year o So – Indexed purchase value = Rs 100000 * (1024/497) = Rs 206036  Long term capital gain = Sale value – Indexed purchase v  Therefore, in our example LTCG = Rs 300,000 – Rs 206,036 = Rs 93,964/- So the tax now would be 20% of Rs 93,964 = Rs 18,792, have had to pay without the indexation benefit.

of sale/ CII for year of purchase) value. , much lesser than Rs 40,000/- you would

What is Arbitration



What is Arbitration?  Arbitration is an alternative dispute resolution mec disputes between the trading members and their cl amicable settlement could be reached through the exchange, then you can make application for refer Stock exchange.  What is an Investor Protection Fund?  make good investor claims, which may arise out of who has been declared a defaulter, in respect of t settle claims of such investors where the trading me declared a defaulter. Payments out of the IPF may securities by the investor from the trading member amount of claim payable from the IPF to the investo has dealt is declared a defaulter) is Rs. 10 lakh.

hanism provided by a stock exchange for resolving lients in respect of trades done on the exchange. If no normal grievance redressal mechanism of the stock rence to Arbitration under the Bye-Laws of the concerned Investor Protection Fund (IPF) is maintained by NSE to non-settlement of obligations by the trading member, trades executed on the Exchange. The IPF is utilised to ember through whom the investor has dealt has been y include claims arising of non payment/non receipt of who has been declared a defaulter. The maximum or (where the trading member through whom the investor

Your rights as a shareho  Your rights as as Dividends  receive within 30 days of its declaration  through ECS/ RTGS /NEFT where such facility available  simple interest @ 18 p.a. for delay in dividend beyond  In case of corporate benefits like rights, bonus, split, cons  To receive Letter of Offer from the company  to receive corporate benefits  General meetings (GMs)  To receive notices  To raise queries on remuneration of the Directors, accou Meeting  To participate and vote in General Meetings either pers  To receive notice along with draft resolution of postal ba

older 30 days solidation etc. unts or on any other business placed before the General sonally or through proxy allot, if any

Your rights as a shareho  As a group, with requisite majority:  To apply to Company Law Board (CLB)  to call or to direct the company to call the Annual General  Management and performance of the company  To receive abridged Annual Report  To inspect and take copies of documents like MoA and AoA companies and firms in which Directors are interested, minu  to investigate the affairs of the company  for relief in cases of oppression and / or mismanagement  To demand poll on any resolution  To apply for the winding up of the company  To proceed against the company by way of civil or criminal  To receive the residual proceeds in case of winding up  To file for arbitration in SE, in case of non / delayed transf

older Meeting (AGM) / Extra Ordinary General Meeting (EGM) A, register of members, directors, their shareholding, Contracts, utes of GMs etc.. l proceeding fer of listed Securities

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www.isfm.co.in 23 May 2022

What are Securities Fraud



SECURITIES FRAUD   Fraud includes any act, expression, om a deceitful manner or not by a person o by his agent while dealing in securities i agent to deal in securities, whether or n of any loss  Securities Fraud leads to market   Market manipulation is a deliber operation of the market and create art respect to the price of the market or Se

mission or concealment committed whether in or by any other person with his connivance or in order to induce another person or his not there is any wrongful gain or avoidance manipulation. rate attempt to interfere with the free/fair tificial, false or misleading appearances with ecurities.

Why Securities Market F  Human Greed  Human ingenuity looking for lo   Declining social & moral values

Frauds ? oopholes in the system

Securities Ma Synchronized/ Structured Trading Circular/Reversal/ Self TIrnasdideesr Trading Front Running Dabba Trading 160

arket Frauds IPO related manipulation: Order Book Manipulation False Corporate Announcements Misleading Stock Recommendations OTHERS www.isfm.co.in 23 May 2022

Synchronized Trad  A synchronized trade is a transaction wherei the buy and sell order quantities are identical, and are put through at exactly the same time on the trading platform.  Circular trades in particular scrip happen when a closely knit set of market entities, mainly brokers, buy and sell shares frequently among themselves to push up the stock price or just inflate volume.  Since there are no genuine intentions to trad in the case of circular trades, the trading volumes thus generated are referred to as artificial volumes. 

de in e de

Insider Trading  Insider trading refers to trading by unpublished price sensitive informat unfair advantage from the informat  Who is an insider?  who is or was connected with the co connected with the company and is virtue of such connection, to unpubli respect of securities of the company  who has received or has had access information

insiders while in possession of tion which is not in public domain, to gain tion so obtained. ompany or is deemed to have been reasonably expected to have access, by ished price sensitive information in y (or) s to such unpublished price sensitive

Insider Trading – Landmark  Hindustan Lever Ltd (HLL) Vs. SEBI (Appellate Authority Cen  Case Summary: HLL and Brooke Bond Lipton India Ltd (BB) w (U). A core team consisting of common directors of HLL and both the companies. HLL purchased 8 lakh shares of BB fro merger of HLL-BB was announced on April 19, 1996.  Findings / Conclusion: No violation. Reasoning - HLL is a dee information (even though was price sensitive) was generally  Rajiv B. Gandhi Vs. SEBI (SAT, 2008)  Case Summary: Rajiv Gandhi (RG) was the CFO and Comp Amishi Gandhi (AG) were the spouse and sister of RG. SG & to date and time of trades, their close relationship with one trades were executed on the basis of the UPSI.  Findings / Conclusion: No violation. Reasoning – Appellants and not even attempted to offer an explanation as to the b

k Cases ntral Government, 1998) were both subsidiaries of the common parent company, Unilever d BB had been set up to consider modalities of amalgamation of om UTI. This transaction took place on March 25, 1996, before the emed insider by virtue of its connection with BB. However, the y known in public even before the public announcement. pany Secretary of Wockhardt Limited. Sandhay Gandhi (SG) and & AG traded in the shares of Wockhardt Limited. Having regard e another, it was alleged that they were insiders and that their s failed to rebut the presumption on which the allegation was made basis which prompted them to trade.

Front Running  Front running is an activity in which a advantage in advance of a large b will move the price of that activity in  - SEBI Order passed by WTM (GA)  The FSA handbook defines front run own benefit, on the basis of and ah with or for another (in respect of wh inside information ) which takes adv order on the market price.

a trader takes a position of unfair buy or sell order that the trader knows n a predictable fashion ) – 1/10/2007 nning as ‘a transaction for a persons’ head of an order which he is to carry out hich information concerning the order is vantage of the anticipated impact of the

Passport India Investment ( (period Jan 2007 to Mar 2  Modus Operandi – A client KB Patel dealing thru b Passport India Investment (Mauritius) Ltd sub-accou  Findings – KB Patel was found to have placed and subsequently squared off positions when the order  Dipak Patel(portfolio manager) point of contact  Analysis of phone records / bank account statemen  SEBI Action: SEBI passed order dated May 28, 200  - Dipak Patel, K B Patel, A B Patel, Bhoomi Industrie  - KB Patel and AB Patel to deposit undue profits m

(Mauritius) Ltd 2009) brokers has put orders ahead of orders placed by unt of Passport Capital LLC- FII executed orders before the orders of Passport India and rs of Passport India were placed in the market nts linked the connection 09 es directed not to buy, sell or deal in securities etc made (Rs. 1,12,68,659.35)

Difference between Inside a 166 Inside Trading No insider either on his own behalf or of any other person deal in securities of a company when in possession of any unpublished price sensitive information  Crime against investors trading without same level of information  Person taking position is insider / tippee  Difficult to prove  Information is price sensitive in nature

and Front Running Front Running  Based on information about a proposed action by a client and crime against client  Person taking position is client, broker, dealer etc  Easier to detect but proving nexus is difficult  Order is price sensitive  Difficult to prove for liquid stocks (BILT was illiquid stock)  Intermediary buying / selling in advance of wwwa.issfumb.csot.ainntia2l3clMieanyt 2o0r2d2er

Dabba Trading & It’s Implication WHAT IS DABBA TRADING? It’s an illegal trading in which prices of securities on recognized stock get executed on the stock exchange system but in the dabba operator A dabba operator acts as a principal to all the trades and not as an should be the Clearing Corporation who guarantees trades on the BO the books of the operator is called “dabba” A Dabba operator flouts rules and regulations relating to Client Protection, which includes registrations, margins, transaction, execution and settlements. Not only he evades the Income tax regulations, which prohibit dealing in cash, but also service tax rules and many other mandatory requirements. In fact, the dabba trader gets a small fee from both the buyer and the seller. Since the trade does not take place on a recognized stock exchange, The counter party risk is not mitigated.

ns exchanges are used as benchmarks and the investor’s trades do not r’s books only. agent of the client. He is a counter party to the trades, whereas, he OLT/NEAT system. This kind of operation, where trade is kept within A dabba operator allows the client to carry forward the trade, be it in cash or in derivative segment for a period, not necessarily prescribed by the stock exchange. The cash trade is not settled on rolling basis and the derivative trade may not have a month-end settlement cycle. Unlike on exchanges, participants may not be asked to put up margin to trade and the contracts will be settled on a weekly basis. Money that has escaped the tax net is used in illegal trading depriving the exchequer of www.isfm.co.in revenues

Others Types of Fraud  IPO related manipulation: Corne  Illegally obtaining IPO shares re benaami (held in fictitious names  Shares transferred to financiers, on the first day of listing, reapin between the IPO price and the l  Order Book Manipulation:  Repeatedly placing orders with deleting the orders.

d ering of shares: eserved for retail investors, through s) demat accounts. who (or through front entities) sold ng windfall gains from the difference listing price. large quantities and subsequently

False Corporate Announcements  Company/promoters puts false and/or misleadi 169  Generates an artificial excitement/ temporary p  Sells the shares before the price goes down Misleading Stock Reco Investment advisers re position.

ing press releases price rise ommendation ecommend stock to public but take opposite www.isfm.co.in 23 May 2022

Corporate Misconduct viz. Enron, Satyam. False market rumours. 23 May 2022

www.isfm.co.in 170 Fake / forged / duplicate share certificates Unauthorized fund raising and Ponzi schemes. Falsifying contract notes – Brokers generating false contract notes for trades which do not take place.

How to Complaint



SECURITIES AND EXCHA Protects the interests of invest develop and regulates the

ANGE BOARD OF INDIA tors in securities, promotes the pment of e securities market 172 www.isfm.co.in 23 May 2022

SEBI HAS THE P AGAINST MANIPULA