In Class 10, students learn about the basic types of securities, their functions, and their role in the financial system. Understanding securities helps build a foundation for financial literacy and future investment decisions.
Securities Class 10 Notes
What is meant by ‘securities’?
Securities are financial instruments that represent ownership, debt, or rights in a company or government according to SCRA.
- Shares and stocks – ownership in a company
- Bonds and debentures – loans given to companies or governments
- Scrips – temporary certificates for shares
- Government securities – issued by the central or state government
- Derivatives – contracts based on the value of other assets (like stocks or commodities)
- Mutual funds – Units of mutual funds or collective investment schemes
- Security receipts – used in asset reconstruction
What is the function of the securities market?
Securities markets are places where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures, etc. It plays an important role in channelling from individuals with surplus funds to businesses and entrepreneurs who need capital.
Which are the securities one can invest in?
- Shares
- Government Securities
- Derivative products
- Units of mutual funds, etc., are some of the securities investors in the securities market can invest in.
Regulator
Why does the securities market need regulators?
SEBI (Securities and Exchange Board of India) plays an important role in ensuring the companies, investors and brokers follow fair rules. This helps to protect investors from fraud, keeps the market stable and ensures that the business and governments can continue to raise money through the market. Without the strong regulator, the market will become unfair or risky for every investor.
Who regulates the securities market?
The responsibility for regulating the securities market is shared by the Department of Economic Affairs (DEA), the Department of Company Affairs (DCA), the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).
What is SEBI, and what is its role?
The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of the SEBI Act, 1992. The SEBI Act, 1992, provides for the establishment of the Securities and Exchange Board of India (SEBI) with statutory powers for
- protecting the interests of investors in securities
- promoting the development of the securities market and
- regulating the securities market.
SEBI also has some special tasks, like.
- Regulating the business in stock exchanges and any other securities markets
- Registering and regulating the working of stockbrokers, sub-brokers, etc.
- Promoting and regulating self-regulatory organisations
- Prohibiting fraudulent and unfair trade practices
- Calling for information from, undertaking inspection, conducting enquiries and audits of the stock exchanges, intermediaries, self-regulatory organisations, mutual funds and other persons associated with the securities market.
Participants
Who are the participants in the securities market?
The securities market works as a bridge between those who need money (corporates and governments) and those who want to grow their money (households and investors). There are three categories of work between these.
- Issuers: Companies and governments that offer securities to raise money.
- Investors: These are individuals or institutions who buy securities.
- Intermediaries: These are middlemen like brokers, merchant bankers and mutual fund managers.
Is it necessary to transact through an intermediary?
The trusted middleman is called an intermediary. For example, if you want to buy or sell stock, you need a trading member. If you want to keep your share in electronic form, you need a depository. When investing in a public issue like an IPO, you require a banker to the issue. SEBI-registered intermediaries because they are officially approved and responsible for their actions. You can find this intermediary on stock exchanges’ websites or through industry associations.
What are the segments of the securities market?
The securities market has two interdependent segments: the primary (new issues) market and the secondary market. The primary market provides the channel for the sale of new securities, while the secondary market deals in securities previously issued.
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