SESSIONAL TEST -2

DEPARTMENT OF COMMERCE &

BUSINESS STUDIES
JAMIA MILLIA ISLAMIA
NEW DELHI –110025.

Submitted to:
Dr. Mohammed Kamalun Nabi

Submitted by:
Charu Vadhava

M.com (business management)

Final year (4th semester)
Roll no: 18MCM009
 Date of submission: April 24, 2020
Question.2. Discuss the aims and objectives of SEBI. Critically explain the role of SEBI in
protecting the interests of investors in secondary market.

ANSWER

SEBI stands for Security and exchange board of India. The Securities and Exchange Board of
India (SEBI) is the most important regulatory body of the securities market in the Republic of
India. SEBI is the counterpart of the Securities and Exchange Commission (SEC) in the U.S. Its
stated objective is “to protect the interests...”

Aims and objectives of SEBI are:

(1) Regulation of Stock Exchanges:

The first objective of SEBI is to regulate stock exchanges so that efficient services may be
provided to all the parties operating there

(2) Protection to the Investors:

The capital market is meaningless in the absence of the investors. Therefore, it is important to
protect the interests of the investors.

The protection of the interests of the investors means protecting them from the wrong
information given by the companies in their prospectus, reducing the risk of delivery and
payment, etc. Hence, the foremost objective of the SEBI is to provide security to the investors.

(3) Checking the Insider Trading:

Insider trading means the buying and selling of securities by those people’s directors Promoters,
etc. who have some secret information about the company and who wish to take advantage of
this secret information.

This hurts the interests of the general investors. It was very essential to check this tendency.

(4) Control over Brokers:

It is important to keep an eye on the activities of the brokers and other middlemen in order to
control the capital market. To have a control over them, it was necessary to establish the SEBI.

Role of SEBI in protecting the interests of investors in secondary market

In order to achieve its objectives, SEBI takes care of the three most important financial market
participants.

— Issuer of securities. These are the companies listed in the stock exchange which raise funds
through the issue of shares. SEBI ensures that the issue of IPOs and FPOs can take place in a
transparent and healthy way.

— Players in the capital market i.e. the traders and investor. The capital markets are
functioning only because the traders exist. SEBI is responsible for ensuring that the investors
don’t become victims of any stock market manipulation or fraud.

— Financial Intermediaries. They act as mediators in the securities market and ensure that the
stock market transactions take place in a smooth and secure manner. SEBI monitors the activities
of the stock market intermediaries like brokers and sub-brokers.

Issue of guidelines: SEBI has issued guidelines to companies (bringing new issues in the market) mutual

funds, portfolio managers, merchant bankers, underwriters,lead managers, etc. These guidelines are for

bringing transparency in their operations and also for avoiding exploitation of investors by one way or the

other.

SEBI has introduced a code of advertisement for public issues for ensuring fair and truthful disclosures. In

order to reduce the cost of issue, the underwriting is made optional on certain terms. These steps are also for

the protection of investors. SEBI keeps watch on all intermediaries and see that they follow the guidelines in

the right spirit. It also takes panel actions when the guidelines are not followed. These steps give protection to

investors.

(2) Public interest advertisements: SEBI issues public interest advertisements to enlighten investors on the
basic features of various instruments and minimum precautions they should take before choosing an

investment. The SEBI desires to create awareness among investors about their rights and about remedies if

problem arise. It has published some booklets for the information and guidance of

investors.

(3) Dealing with complaints of investors: The investors can make complaints to SEBI if they face problems

relating to their investment in industrial securities and financial assets. SEBI receives thousands of

complaints relating to non-receipt of refund orders, allotment letters, non-receipt of dividend or interest and

delays in the transfer of shares and debentures. SEBI is making efforts to solve such complaints through

appropriate measures. SEBI is keen to solve the complaints of investors and wants to protect their interests.

It is committed to co-operating with various consumer redressal forums in this regard. Although, a large

number of complaints reaching SEBI are being redressed, still a large number of complaints remain

unredressed. Hence in this way we can see the role of SEBI to protect the investors had been

improved with the passing of the years. It should be seen that from where it has begun its journey.

There were various scams just after SEBI was born such as Harshad Mehta scam etc. It had

strengthened its role as regulatory body and with the advent of new technologies it had also gone

techno-savvy by bringing in new reforms such as e-broking, share trading through the websites of

brokers etc.
Question 3

What are the functions of WTO? Discuss its regulating framework and critically analyze the role
of WTO in promoting international trade.

ANSWER:

The World Trade Organization (WTO) is the single global international organization dealing
with the rules related to international trade. WTO’s agreements are negotiated and signed by a
majority of prominent trading nations. The World Trade Organization is an intergovernmental
organization that assists the nations in regulating trade in manufactured goods, services
(including banking, insurance, tourism and telecommunications), intellectual property, textiles
and clothing and agricultural products (Richard Schaffer, 1996). The WTO replaced GATT
(General Agreement on Tariffs and Trade) as the world's global trading body in 1995.

Functions of WTO

Among the various functions of the WTO, these are regarded by analysts as the most important:

1. It oversees the implementation, administration and operation of the covered

agreements. 

2. It provides a forum for negotiations and for settling disputes.

Additionally, it is WTO's duty to review and propagate the national trade policies, and to ensure
the coherence and transparency of trade policies through surveillance in global economic policy-
making. Another priority of the WTO is the assistance of developing, least-developed and low-
income countries in transition to adjust to WTO rules and disciplines through technical
cooperation and training.
 3. The WTO shall facilitate the implementation, administration and operation and
further the objectives of this Agreement and of the Multilateral Trade Agreements,
and shall also provide the framework for the implementation, administration and
operation of the multilateral Trade Agreements.

4. The WTO shall provide the forum for negotiations among its members concerning
their multilateral trade relations in matters dealt with under the Agreement in the
Annexes to this Agreement.

5. The WTO shall administer the Understanding on Rules and Procedures Governing the
Settlement of Disputes.

6. The WTO shall administer Trade Policy Review Mechanism.

With a view to achieving greater coherence in global economic policy making, the WTO shall
cooperate, as appropriate, with the international Monetary Fund (IMF) and with the International
Bank for Reconstruction and Development (IBRD) and its affiliated agencies.

The above five listings are the additional functions of the World Trade Organization. As
globalization proceeds in today's society, the necessity of an International Organization to
manage the trading systems has been of vital importance. As the trade volume increases, issues
such as protectionism, trade barriers, subsidies, violation of intellectual property arise due to the
differences in the trading rules of every nation. The World Trade Organization serves as the
mediator between the nations when such problems arise. WTO could be referred to as the
product of globalization and also as one of the most important organizations in today's globalized
society.

The WTO is also a centre of economic research and analysis: regular assessments of the global
trade picture in its annual publications and research reports on specific topics are produced by
the organization. Finally, the WTO cooperates closely with the two other components of the
Bretton Woods system, the IMF and the World Bank.

Regulatory framework
The legal framework of WTO is to see the proper execution of fair trade practices and the extent
up to which the rules and regulations should be taken into consideration while doing trade with
different countries. The problem faced lies with the implementation of various rules and
regulations, how to resolve the disputes among different traders and making decisions for the
organization.

Under the Article 4.1 of the WTO agreement, the Conference among the ministry is the highest
authority of WTO. The conference details the voluntary decision making all the members of
WTO confined to the legislative body. The meeting of the Ministerial Conference must be done
in every two years. These meetings explain the wide range of political interactions of the
Conference held for through discussions and decisions.

It is not necessary that the Ministerial conference actually needs to deliver the proper influence
over the obligatory feat over the WTO members. In contrary the General council calls for the
general meet with all its Member State’s ambassadors apparently once in every subsequent
month in Geneva, this meeting is done related to the economic condition in order to get
investigated and possible amendments could be made on the decisions making. Its main
objective is to frame and analyze the policies related to national trade and in order to run other
authorities in the WTO such as the secretariat. Every member of the WTO was specified to
participate in disputes settlements panels, committees exempting from the Appellate body,
councils and Textiles Monitoring Body. The administrative and technical support was provided
by the Secretariat among both the WTO and developing countries which were laid on different
trade policies, resolutions of trade and advice of the governments.

To keep checks on the rules and regulation, the country’s voting system plays a very crucial role
as each country can just vote one time, though it does not matter because they are not taken into
account.

Role of WTO in promoting the international trade

WTO facilitates implementation, administration and smooth operations of trade agreements

between the countries.

1. It provides a forum for the trade negotiations between its member countries.
 2. Settlements of disputes between the member countries through the established rules
and regulations.

3. It cooperates with the IMF (International Monitory Fund) and World Bank in terms of
making cohesiveness in making global economic policies.

4. The WTO supports the fair competition in the global market. For example, the

agreements on government procurement specify the competition rules to purchases by

the several governments in several countries. Hence, it is a structure of rules committed

to open, fair and undistorted competition.

5. The agreements of WTO encourage its members to adopt appropriate measures to protect

not only the environment but also the public health, animal health and plant health. The

policies of protecting the environment should be implemented on equity basis to both

national and global businesses.

Overall WTO was set up to play a very important role in the world economics though
settling trade related disputes through rules, regulations and consensus based agreement
mechanisms that would prevent trade related wars between powerful countries.

Through resolving trade related disputed WTO has got the potential to maintain world peace and
bilateral relations between its member countries thorough following negotiations, consultations
and mediations.