Given below are two statements:
Statement I: Unofficial private placements and rigging of prices were among the malpractices in the securities market before SEBI was set up.
Statement II: The malpractices before SEBI were mainly on the part of depositories and depository participants.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is correct but Statement II is incorrect.
Statement I: Unofficial private placements and rigging of prices were among the malpractices in the securities market before SEBI was set up. — Correct. Both are among the glaring examples, along with self-styled merchant bankers and delay in delivery of shares.
Statement II: The malpractices before SEBI were mainly on the part of depositories and depository participants. — Incorrect. The malpractices were on the part of companies, brokers, merchant bankers, investment consultants and others. Depositories and DPs are not among them.
NCERT (Pre-rationalised Edition): “Reasons for the Establishment of SEBI The capital market has witnessed a tremendous growth during 1980’s, characterised particularly by the increasing participation of the public. This ever expanding investors population and market capitalisation led to a variety of malpractices on the part of companies, brokers, merchant bankers, investment consultants and others involved in the securities market. The glaring examples of these malpractices include existence of self – styled merchant bankers unofficial private placements, rigging of prices, unofficial premium on new issues, non-adherence of provisions of the Companies Act, violation of rules and regulations of stock exchanges and listing requirements, delay in delivery of shares etc. …” |