Section 3. Application for recognition of stock exchanges

3. Application for recognition of stock exchanges. —(1) Any stock exchange, which is desirous of being recognised for the purposes of this Act, may make an application in the prescribed manner to the Central Government. (2) Every application under sub-section (1) shall contain such particulars as may be prescribed, and shall be accompanied by a copy of the bye-laws of the stock exchange for the regulation and control of contracts and also a copy of the rules relating in general to the constitution of the stock exchange, and in particular, to— (a) the governing body of such stock exchange, its constitution and powers of management and the manner in which the business is to be transacted; (b) the powers and duties of the office bearers of the stock exchange; (c) the admission into the stock exchange of various classes of members, the qualifications for membership, and the exclusion, suspension, expulsion and re-admission of members therefrom or thereinto; (d) the procedure for the registration of partnership as members of the stock exchange in cases where the rules provide for such membership; and the nomination and appointment of authorised representatives and clerks. 3. The Bill, as now drafted, broadly follows the recommendations contained in the report of the Gorwala Committee. The scheme of regulation contemplated in the Bill provides for (a) the prior recognition of the stock exchanges, subject to the fulfillment by them of certain conditions relating to their membership and their rules and bye-laws (Clauses 3, 4 and 5); and (b) a general control over their trading methods and practices, to be exercised through the powers proposed to be conferred on the Central Government to approve of their rules, regulations, and bye-laws and to make or amend them (Clauses 8, 9 and 10). Powers are taken in clauses 11 and 12 to deal with abnormal situations or emergencies, which may gravely affect the working of the stock exchanges and call for urgent and drastic action by the Central Government. The Central Government are also empowered to call for such information as they may require in respect of the affairs of a stock exchange or of any of its members and also to direct investigations to be made into the affairs of a stock exchange, if they consider that it is in the interest of trade or in the public interest to do so (clause 6). Clauses 13 and 14 of the Bill impose certain restrictions on transactions in securities carried on in or outside the recognised stock exchanges, while cl. 19 specifically prohibits dealing in options in securities. Power is also taken in cl. 17 to prohibit transactions in specified securities, after consultation with the exchanges concerned, In order to prevent undesirable speculation in them. In order to regulate the buying and selling of securities outside the recognised stock exchanges, the Bill provides for the licensing of all dealers in securities who are not members of a recognised stock exchange or are otherwise exempted from the licensing requirements, (clause 18). The provisions of the Bill on this subject broadly follow the pattern of control underlying the Prevention of Fraud (investments) Act in the U.K. which was passed in 1939, and are intended to protect small and ill-informed investors against unscrupulous share brokers and dealers. ==> picture [472 x 57] intentionally omitted <== NEW DELHI: The 22 nd December , 1954. C.D. DESHMUKH.