Post liberalisation foreign investment was encouraged and regulated under the Foreign Exchange Management Act. Foreign Direct Investment was seen as a tool for economic development and integration. It boosted capital formation and strengthened global ties with other countries. While FDI is not directly connected with the stock markets and focuses primarily on the optimization of resource management, technological upgradation and expansion of the company, FII directly contributes towards the growth of capital markets. It increases the size of the stock markets alongwith the transparency, technology, investor protection, informational standards and operational standards at par with international stock markets.

In 1996-97, several changes have been made to the SEBI (Foreign Institutional Investors) Regulations, 1995 to diversify the foreign institutional investor base and to further facilitate inflow of foreign portfolio investment. The changes have also aimed at facilitating investment in debt securities through the FII route. The changes are as follows: firstly,the eligible categories of FIIs have been expanded to include university funds, endowments, foundations, charitable trusts and charitable societies which have a track record of 5 years and which are registered with a statutory authority in their country of incorporation or establishment, secondly, each FII or sub-account of an FII has been permitted to invest upto 10% of the equity of any one company, subject to the overall limit of 24% on investments by all FIIs, NRIs and OCBs,the 24% limit may be raised to 30% in the case of individual companies who have obtained shareholder approval for the same,FIIs have been permitted to invest in unlisted securities,FIIs have been allowed to invest their proprietary funds,FIIs who obtain specific approval from SEBI have been permitted to invest 100% of their portfolios in debt securities. Such investment may be in listed or to be listed corporate debt securities or in dated government securities, and is treated to be part of the overall limit on external commercial borrowing.Recently, in a circular issued by SEBI, the foreign investment limit per fund has been increased from 300 million USD to 600 million USD, while capping the overall industry limit at $7 billion.


 Companies Act, 2013 is the latest Act which replaced the older Companies Act, 1954. Companies Act, 2013 has provisions which not only further cuts down on fraudulent activities but also ensures higher standards of corporate governance by guaranteeing investors their rights.If a person induces another one to acquire, dispose, subscribe or underwrite securities by making false and misleading statement then such person would be said to have committed fraud under section 447 of the Companies Act, 2013 and will be imprisoned for a minimum of six months which may extend up to ten years.If a person uses fake names to get multiple shares from the company or uses false names for obtaining shares then the person will be guilty of fraud under section 447 of the Act.The Act also states about Global Depository Receipts which can only be issued by a company in a foreign country after the special resolution in general meeting is passed.It is an obligation on the issuing company to deliver share certificate to the investor within two months of allotment. In addition to it, every share certificate should have a distinct number.

According to the SEBI guidelines for Disclosure and Investor Protection, 1992 90% of the total number of shares to be issued in the IPO should be subscribed by investors for a successful IPO. Therefore, before going for the IPO issuer approaches the underwriter, who underwrites certain number of shares. The underwriter takes a huge amount of risk by underwriting the securities and therefore, is entitled for commission under section 40 (6) of the Act.The issuer can also issue ‘sweat equity shares’ under section 53 to the directors or employees of the company for providing the know-how to the company.


There are few instances which suggest that despite having a well formulated legal framework scandals emerged in our capital market. This calls for the regulatory system in the capital market revised. Hence, the recommendations are listed as follows:-

National Stock Exchange of India (NSE) was set up with computerized online screen based nationwide electronic trading, Counter Exchange of India (OTCEI) was set up with computerized mechanism with the facility of online electronic trading for much transparency in the capital market.In order to eliminate problems relating to loss of allotment letters, share certificates, etc., and to induce the investors to opt for allotment of dematerialised shares, the trading for IPOs in dematerialised form had been made compulsory with an option available to the investors for physical shares.The purpose for which the SEBI was established was to ensure the protection of the interests of the investors, to monitor or regulate and stimulate the growth of the securities market. There are a number of actions taken by the Board on persons, intermediaries for violating or contravening the rules or guidelines that might endanger the development of the securities market. The work done by the SEBI so far is promising for the progress of our stock market.To facilitate greater participation in foreign portfolio investment (FPI), SEBI may consider modifying some aspects of the new FPI regulatory framework for promoting FPI investments. For example, the investment limit for a single FPI investor can be increased from the existing limit of 10 percent of a company’s equity capital to allow those investors to build significant positions in Indian companies without triggering the “control” provisions.Instead of introducing more regulations, SEBI can better address corporate governance issues by strengthening the application of existing provisions and by establishing accountability for directors who fail to perform their fiduciary duties. In this regard, SEBI could provide a principle-based guidance note that elaborates the context and examples of the fiduciary duties of board members, such as due diligence, duty of loyalty, etc.There is an urgent need to redefine the regulatory architecture. gaps. There are currently more than half a dozen regulatory agencies. SEBI, IRDA, PFRDA, EPFO, RBI, FMC plus several ministries leading to jurisdiction overlap, narrow sectoral attitudes and regulatory gaps, regulatory arbitrage. The most recent were conflicts between IRDA and SEBI over Inusrance Unit Linked (ULIP) plans. This overlapping regulatory body is the main cause of ineffective regulation, inability and delay in exploring new markets and product design, etc. India needs to streamline the regulatory structure of the financial market and move to the single window approval process.

The development of innovative capital market tools is needed in order to reduce the risk to investors and promote the financing of long-term projects in infrastructure. It is necessary to establish a certain framework for the duration of holding investments in the market for stable capital market.Investigations are to be undertaken to examine alleged or suspected violations, to gather evidence, and to identify persons/entities behind irregularities and violations, such as: price manipulation, creation of artificial market, insider trading, etc. As per the Annual Report 2006-07, grievances, investor protection mechanism and investor complaints should be taken efficiently.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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