SEBI - Securities and
Exchange Board of India
What is SEBI?
• The Securities and Exchange Board of India (SEBI) was founded as the
regulating authority for the Indian securities market on April 12, 1992,
by the SEBI Act 1992.
• SEBI is essentially a statutory body of the Indian Government that was
established on the 12th of April in 1992. It was introduced to promote
transparency in the Indian investment market.
• Besides its headquarters in Mumbai, the establishment has several
regional offices nationwide, including New Delhi, Ahmedabad, Kolkata
and Chennai.
History of SEBI
• Before the foundation of SEBI, the securities market was regulated by
several government institutions, resulting in inconsistency and
inefficiency.
• The Indian government awarded SEBI new regulatory powers in 2014,
allowing it to undertake search and seizure operations and apply
harsher punishments for rigging markets and insider trading.
• Today, SEBI is regarded as one of the world's top regulatory
authorities and plays an essential role in the growth and regulation of
the Indian securities market.
Objectives of SEBI
• SEBI is entrusted with regulating the functioning of the Indian capital
market. The objectives of SEBI as a regulatory body are to monitor
and regulate India's securities market to safeguard investors'
interests.
• It aims to inculcate a safe investment environment by implementing
several rules and regulations and formulating investment-related
guidelines.
• Furthermore, one of the other main objectives was to avoid
malpractices in the Indian stock market.
Organizational Structure of SEBI
• SEBI India follows a corporate structure. It has a Board of Directors, senior
management, department heads and several crucial departments.
• To be precise, the structure of SEBI comprises over 20 departments, all of
which are supervised by their respective department heads, which in turn
are administered by a hierarchy in general.
• The hierarchical structure comprises the following 9 designated officers –
• The Chairman – Nominated by the Indian Union Government.
• Two members belonging to the Union Finance Ministry of India.
• One member belonging to the Reserve Bank of India or RBI.
• Other five members – Nominated by the Union Government of India.
Departments of SEBI
• The Information Technology Department.
• The Foreign Portfolio Investors and Custodians.
• Office of International Affairs.
• National Institute of Securities Market.
• Investment Management Department.
• Commodity and Derivative Market Regulation Department.
• Human Resource Department.
Functions and Powers of SEBI
• 1. Protective Function
• 2. Regulatory Function
• 3. Development Function
Protective Function: The protective function includes the
following activities.
• Prohibits insider trading: Insider trading is the act of buying or selling of the securities
by the insiders of a company, which includes the directors, employees and promoters.
To prevent such trading SEBI has barred the companies to purchase their own shares
from the secondary market.
• Check price rigging: Price rigging is the act of causing unnatural fluctuations in the
price of securities by either increasing or decreasing the market price of the stocks
that leads to unexpected losses for the investors. SEBI maintains strict watch in order
to prevent such malpractices.
• Promoting fair practices: SEBI promotes fair trade practice and works towards
prohibiting fraudulent activities related to trading of securities.
• Financial education provider: SEBI educates the investors by conducting online and
offline sessions that provide information related to market insights and also on money
management.
Regulatory Function:
• SEBI has defined the rules and regulations and formed guidelines and
code of conduct that should be followed by the corporates as well as
the financial intermediaries.
• Regulating the process of taking over of a company.
• Conducting inquiries and audit of stock exchanges.
• Regulates the working of stock brokers, merchant brokers.
Developmental Function
• Training of intermediaries who are a part of the security
market.
• Introduction of trading through electronic means or through
the internet by the help of registered stock brokers.
• By making the underwriting an optional system in order to
reduce cost of issue.
Powers of SEBI
Following are the key powers of SEBI-
Quasi-judicial Powers
• In cases of fraud and unethical practices in the securities market, SEBI India can pass
judgements.
The said power of SEBI facilitates transparency, accountability and fairness in the securities
market.
Quasi-executive Powers
• SEBI can examine the Book of Accounts and other vital documents to identify or gather
evidence against violations. If it finds one violating the regulations, the regulatory body can
impose rules, pass judgements and take legal actions against violators.
Quasi-Legislative Powers
• To protect the interest of investors, the authoritative body has been entrusted with the power
to formulate pertinent rules and regulations. Such rules tend to encompass listing obligations,
insider trading regulations and essential disclosure requirements.
