Understanding Capital Markets In India
Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions. In the capital market, both equity and debt instruments, such as equity shares, preference shares, debentures, zero-coupon bonds, etc. are bought and sold, and it also covers all forms of lending and borrowing.
Capital markets help channelize surplus funds from savers to institutions which then invest them into productive use.
Major Functions Of The Capital Market
- This market generally trades in long-term securities.
- The funds can be used for productive purposes and create wealth in the economy in the long term.
- Provide ease of transactions for both the investors and the companies.
- Minimization of transaction and information cost.
- Facilitates trading of securities.
- Quick valuations of financial instruments
Types Of Capital Market
The capital market is bifurcated in two segments – primary market and secondary market which are explained below in brief:
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Primary Market
The primary market is a new issue market and it deals with the issues of new securities, i.e., securities that are issued to investors for the very first time. The main function of the primary market is capital formation for the companies, governments, institutions etc. and helps investors invest their savings and extra funds in companies for starting new projects or enterprises looking to expand their companies.
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Secondary Market
The secondary market is a place where trading takes place for existing securities. It is known as stock exchange or stock market and the securities are bought and sold by the investors. There is no fresh issue in the secondary market. The securities in the secondary market are traded in a highly regularised and legalized manner within strict rules and regulations. This ensures that the investors can trade without fear of being cheated. In the last decade or so due to the advancement of technology, the secondary capital market in India has seen a great boom.
Understanding The Role Of Company Secretaries In The Capital Market
A company secretary plays a very important role in the capital market and its related compliances.
The disclosure, transparency, accountability and investor protection are important for growth and development of capital market. This requires listed companies to comply with requirements under various regulations and guidelines issued by SEBI and stock exchanges. The companies accessing capital market need to have a professional who is expert in capital markets and corporate governance, in ensuring adherence to all compliances which they find in the form of a company secretary.
Company secretaries are now more popularly known as “Governance Professionals” and are called upon to guide the corporate board on various strategic, governance-related and compliance issues related to capital markets. Broadly, CS professionals have been authorized to verify compliances and issue certificates under various securities laws, SEBI regulations and guidelines, Listing agreements, etc.
A company secretary has been authorized to be Compliance Officer under the following:
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Equity Listing Agreements
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Issue of debt securities
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Model listing agreement for Indian Depository Receipts (IDRs)
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SME listing agreements
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Various capital market intermediaries such as members of stock exchange, depository participants, mutual funds, merchant bankers, etc.
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Listing agreements for IDRs who are signatories to MoU of IOSCO
A company secretary has been also authorized to issue quarterly certificate to regard to reconciliation of total capital held by the depository in the DEMAT form, details of change in capital during the quarter, etc. under SEBI regulations.
Moreover, a practising company secretary is authorized to undertake internal audit of various capital market intermediaries such as portfolio managers, stockbrokers/trading members, credit rating agencies, depository participants, investment advisors, etc.
There is an endless list of regulatory compliances, certifications, responsibilities, etc. that a CS professional is required to understand and ensure compliance primarily under Company Law or under SEBI regulations or under listing agreements.
–Written by
Amrita Deol
Amrita leads Coinmen’s Corporate Secretarial Services as an Assistant Manager.
