Get fully solved SMU MBA Assignments
August/Fall
2012
Masters
of Business Administration– Semester 4
MF0017
– Merchant Banking and Financial Services – 4 Credits
Book
ID: 1318
Assignment
Set- 1 (60 Marks)
Note: Each
question carries 10 Marks. Answer all the questions.
Q.1 What
do you understand by insider trading. What are the SEBI rules and regulations
to prevent insider trading. [10]
Answer : An insider
is a person who is connected with a company and who is expected to have access
to unpublished sensitive information with respect to securities of the company.
A person who has access to unpublished information which deals in securities
and is involved in violations of the provisions will be guilty of insider
trading. Insiders have access to confidential information of a company due to
the position occupied by them in the company. They are in a position to
manipulate the share prices to their own advantage and make huge profits. These
actions cause major fluctuations in the prices of the securities. Considering
the fact that the actions of insiders cause devastating effects on the
functioning of stock exchange, SEBI has issued regulations to control such
practices. Another problem that the stock market faces is unofficial trading in
shares before listing of new companies. The company is not guilty of insider
trading if the acquisition of shares was as per SEBI Substantial Acquisition of
Shares and Takeover Regulations. If SEBI suspects that any person has violated
the regulations of prohibition of insider trading, it can initiate an inquiry.
For the prevention of insider trading, SEBI has introduced a policy on
disclosure and internal procedure. According to this policy:
• All listed companies and organisations associated with the
securities markets have to frame a code of conduct for internal procedure as
per the specified model.
• Any person holding more than five per cent shares in any
listed company has to disclose the number of shares held by him to the company,
within 54 working days.
• Every listed company must disclose the information
received about the initial and continual disclosures within five days to all
the respective stock exchanges.
Any person other than a company violating the disclosure
provisions would be liable for action under the SEBI Act. SEBI has prescribed a
model code of conduct for prevention of insider trading for listed companies.
According to this model, the listed company appoints a compliance officer who
reports to the managing director and is responsible for setting the policies
and procedures, monitoring adherence to the rules for the preservation of
‘price sensitive information’, pre-clearance of designated employees’ trade,
monitoring of trades and implementation of the code of conduct. Preservation of
price sensitive information is done by the employees and directors. They have
to maintain confidentiality of all price sensitive information. The information
must not be passed to any person directly or indirectly.
Regulatory provisions
Merchant bankers are administered by the SEBI (Merchant
Bankers) Rules and Regulations, 1992. According to the rules and regulations, a
merchant banker is a person who is engaged in the business of issue management
either by buying, subscribing to securities as manager, consulting or rendering
corporate advisory service in relation to issue management. The regulatory
framework is designed to ensure that the merchant bankers have sufficient
competence and follow diligence in their work so that the issuers comply with
the statutory requirements concerning the issue. SEBI has emphasised on
ensuring that all merchant bankers fulfil the eligibility criteria. As stated
earlier, all merchant bankers must have a valid registration certificate.
Merchant bankers must follow the general obligations, responsibility, code of
conduct prescribed under the SEBI regulations. Under the regulations, the
merchant bankers must submit periodical returns and other additional
information to SEBI regularly. SEBI has the authority to conduct inspection of
the accounts, records and documents of the merchant banker at any time if
necessary.
Q.2 What
is the provision of green shoe option and how is it used by companies to
stabilize prices. [10]
Q.3
Discuss the proportionate allotment procedure followed by the lead banker to
allot shares. [10]
Q.4 What
are the advantages of leasing to a company. [10]
Q.5
Discuss Accounting standard 19 for lease based on operating lease. [10]
Q.6 Given
the various types of mutual funds, take any two schemes and discuss the
performance of the schemes. [10]
Get fully solved SMU MBA Assignments
August/Fall
2012
Masters
of Business Administration– Semester 4
MF0017
– Merchant Banking and Financial Services – 4 Credits
Book
ID: 1318
Assignment
Set- 1 (60 Marks)
Note: Each
question carries 10 Marks. Answer all the questions.
Q.1 What are the provisions
for prevention of fraudulent and unfair trade practices by SEBI regulations.
[10]
Answer :
Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities
The SEBI (Prohibition of Fraudulent and Unfair Trade
Practices relating to the Securities Market) Regulations, 2003 authorises SEBI
to investigate into cases of market fraudulent and unfair trade practices. The
regulations prohibit market manipulation, misleading statements to increase
sale or purchase of securities, unfair trade practices relating to securities.
The SEBI can conduct investigation by an investigating officer regarding
conduct and affairs of any person dealing, buying, and selling securities. The
investigating officer prepares a report based on this information. The SEBI can
take action for cancellation or suspension of registration of an intermediary
based on this report. Fraud is any act, expression or concealment committed by
a person or his agent while dealing with securities in order to prompt the deal
in securities. The regulations prohibit the dealing in securities in fraudulent
method, it prohibits market manipulation, misleading statements that promote
sale of securities and unfair trade practice related to securities. Any dealing
in securities shall be considered to be fraudulent or an unfair trade practice
if it involves fraud. The following are considered as fraudulent or an unfair
trade practice if it:
• Indulges in an act which creates misleading or false
impression of trading in securities market.
• Advances or agrees to advance any money to any person to
induce other person to buy any security in any issue with an intention of
securing the minimum subscription to such issue.
• Pays, offers, or agrees to pay directly or indirectly to
any person, any money for inducing such person for dealing in any security with
the object of depression or causing fluctuation in the price of such security.
• Acts to manipulate the price of security.
• Publishes reports, dealing in securities which are not
true.
• Sells and deals with stolen security whether in physical
or dematerialised form.
• Advertises misleading or containing information in a
distorted manner which can influence the decision of the investors.
• Spread false or misleading news which induces sale or
purchase of securities.
For restricting unethical trading practices, SEBI propagated
the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the
Securities Market).
Q.2
Discuss the method of price discovery using the book building process. [10]
Q.3 Discuss
the role of a custodian of shares. [10]
Q.4 A
company wishes to take machinery on lease. Study the lease options available to
the company. [10]
Q.5 Give
examples of various venture capital funds that are present and examples of some
business ventures that have been successful with venture capital financing. [10]
Q.6 Mutual
fund schemes can be identified by investment objective, List one scheme within
each category. [10]
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.