Everything you should know about SEBI

Securities and Exchange Board of India (SEBI) is a statutory regulatory body entrusted with the responsibility to regulate the Indian capital markets. It monitors and regulates the securities market and protects the interests of the investors by enforcing certain rules and regulations.

SEBI was founded on April 12, 1992 under the SEBI Act, 1992. Headquartered in Mumbai, SEBI has regional offices in New Delhi, Chennai, Kolkata and Ahmedabad along with other local regional offices across prominent cities in India.

The objective of SEBI is to ensure that the Indian capital market works in a systematic manner and provide investors with a transparent environment for their investment. To put it simply, the primary objective of setting up SEBI is the creation of such an environment that helps in effective mobilization as well as the allocation of resources with the help of securities market of India.

Objectives

SEBI has many objectives and is meant for the betterment of each participant in the market, be it investors, intermediaries or the issuers of securities. Some of these objectives are-

  1. Provide protection: It guides and educates people who are willing to invest their money in the securities market. This is done in order to protect their interests.
  2. Preventing malpractices: It aims at prohibiting of all kinds of malpractices which are prevalent in the trading market.
  3. Professional and Competitive environment: SEBI has the objective to develop a code of conduct through which it can easily regulate the activities of the intermediaries. Brokers, merchant bankers are some of the intermediaries. The main objective of SEBI is to make these intermediaries professional and competitive.
  4. Orderly Functioning: SEBI has been entrusted with the duty of promoting the functioning of the securities industry and stock exchanges in an orderly manner.
  5. Establishing balance: SEBI also maintains a balance between the regulations provided by various statutes and the regulations made by the securities industry.

Functions of SEBI

SEBI is entitled to fulfil various functions, which can be divided into the following three parts:

  • Developmental functions
  • Protective functions
  • Regulatory functions

These broad functions can be subdivided into various other functions. Some of them are as follows:

DEVELOPMENTAL FUNCTIONS

There are various developmental functions of SEBI. Some of them are as follows:

  • Promoting fair trade: SEBI has made underwriting optional in order to achieve the goal of promotion of fair trade.
  • Research: SEBI also makes a publication of the data and information which is necessary for various participants of the market in order to conduct effective research.
  • Training of brokers: Intermediaries of the securities market are trained to promote the efficiency of the market.

PROTECTIVE FUNCTIONS

There are various protective functions of SEBI. Some of them are as follows:

  • Prevention of various Fraudulent and Unfair Trade Practices: Price ragging and purchase or sale of securities with the help of several misleading statements are some of instances of Fraudulent and Unfair Trade Practices. SEBI aims at prohibiting such practices.
  • Prohibition of Insider Trading: Promoters, directors and other key managerial personnel of the companies take advantage of the possession of the unpublished price sensitive information for making profits by trading into securities. SEBI aims at preventing such insiders to trade.
  • Educates Investors: SEBI organizes various campaigns in to order to promote awareness amongst the investors. This is done to protect them, from various fraudulent activities prevalent in the securities market.
  • Promotion of Fair Practices: SEBI is also responsible for the promotion of code of conduct and other fair practices in the market of securities in India. For instance, SEBI regularly keeps a check on the interests of debenture holders with respect to any midterm revision of rates of interest and many more.

REGULATORY FUNCTIONS

  • Notifications of various Rules and Regulations: SEBI is empowered to issue various rules and regulations to make the functioning of all the intermediaries existing in the securities market smooth.
  • Levying of Fees: If any of the players of the market contravenes any order or direction passed by it, SEBI has the power to levy penalties, fees and other charges for the same.
  • Registration of Agents and Brokers: For the purpose of making a safe market place for trading into the securities, it is mandatory for all the transfer agents, brokers, merchant banks, sub-brokers and so on to register themselves.
  • Regulator of Investment Schemes: It has made the registration of mutual funds and collective investment schemes mandatory in order to regulate them.
  • Exercising and Performing Powers: SEBI has been delegated various powers under the Securities Contracts (Regulation) Act 1956 by the Government of India. SEBI exercises and performs all such powers.
  • Enquiries and Inspection: SEBI conducts various inspections and undertakes audits and enquiries of stock exchanges of India.