‘Investment’ is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income (dividend), or appreciation of the value of the instrument. It is related to saving or deferring consumption. Investment is involved in many areas of the economy. An investment involves the choice by an individual or an organization after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time. Investment comes with the risk of the loss of the principal sum. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner’s control. The difference between speculation and investment can be subtle. It depends on the investment owner investor’s mind whether the purpose is for lending the resource to someone else for economic purpose or not. A ‘security’ is a fungible, negotiable instrument representing financial value. Securities are broadly categorized into debt securities and equity securities.
The term “investor protection” defines the entity of efforts and activities to observe, safeguard and enforce the rights and claims of a person in his role as an investor. The Law of Investment and Securities usually aims at the following objectives viz., investor protection; better transparency; market integrity; market efficiency, quality of supervision and competitiveness of capital markets.
The World economy has been experiencing a progressive international economic integration for the last half a century. There has been a marked acceleration in this process of globalization and also liberalization during the last three decades. In tune with these changes certain developments have been brought into Legal frame work governing the Securities market in India. The four main legislations governing the ‘investment and securities’ market in India are (1) the Securities Contracts (Regulation) Act, 1956,which provides for regulation of transactions in securities through control over stock exchanges; (2) the SEBI Act, 1992 which establishes SEBI to protect investors and develop and regulate securities market; (3) the Depositories Act, 1996 which provides for electronic maintenance and transfer of ownership of demat securities and (4) the Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation to issue, allotment and transfer of securities, and disclosures to be made in public issues.
In this book we have discussed the broad outlines of the legislations governing the law of Investments and Securities market in India like (1) The Companies Act, 1956 (2) The Security Contracts (Regulation) Act, 1956 (3) The Securities and Exchange Board of India Act, 1992, and other legislations like A.P. Protection of Depositors Act, 1999 and topics like Non-Banking Financial Institutions. This book provides a short cut to the students of the 3 year law degree course to enable them to get a broad understanding of the topics that would be covered under the revised syllabus with effect from the academic year 2009-2010.
We owe our gratitude to Mr D. Durga Prasad, LL.B, FCS, for his personal attention, inputs and technical support. Our thanks are also due to Mr. M. Venkateswarlu for his wholehearted and efficient secretarial support in bringing out this Book.
