SEBI

Introduction
SEBI is also known as the Security and Exchange Board of India was
established on 12 April 1992 through the SEBI Act, 1992. It was a non-
statutory body established to regulate the securities market. The
headquarters of the board is situated in Bandra Kurla Complex, Mumbai.
SEBI helps in regulating the Indian Capital Market by protecting the
interest of investors and establishing the rules and regulations for the
development of the capital market.
SEBI
SEBI or the Security and Exchange Board of India is a regulatory body
controlled by the Government of India to regulate the capital and
security market. Before the Security and Exchange Board of India, the
Controller of Capital Issues was the regulating body to regulate the
market which was controlled by the Capital Issues (Control) Act, 1947.
Majorly, SEBI controls the issuers of securities, the investors and the
market intermediaries. The Board draft regulations and statutes under its
legislative authority, also pass rulings and orders under its judicial
capacity and operate investigations in its executive limits. SEBI works as
a barrier to avoid malpractices related to the stock market by
establishing a code of conduct and promoting the healthy functioning of
the stock exchange. Initially, SEBI didn’t have the authority to regulate
the stock exchange, but in 1992 the Union Government gave statutory
powers to SEBI through the SEBI Act, 1992.
Reasons for the Establishment of SEBI
During the fall of the 1970s and the rise of the 1980s, the people of India
were preferring to work in the Capital Market as the market was
trending. Without any authority, problems like unofficial private
placements, the rigging of prices, unofficial self-styled merchant bankers
started violating the rules and regulations of the stock exchange which
caused delays in the delivery of shares.
The Government felt an immediate need to establish a regulatory body to
regulate its working and to find solutions for all the problems the market
was going through, as the people were losing interest in the market. This
led to the establishment of the Security and Exchange Board of India.
Purpose and Role of SEBI
SEBI helps in creating a healthy environment to facilitate an effective
mobilization between the market participants and investors. It helps in
locating the resources with the help of the securities market. SEBI
establish rules and regulations, policy framework and infrastructure to
meet the needs of the market.
The financial market majorly comprises of three groups:
The Issuer of Securities
Issuers are the group that works in the corporate department to easily
raise funds from the various sources of the market. So, SEBI helps the
issuers by providing them a healthy and open environment to work
efficiently.
Investors
The investors are the soul of the market as they keep the market alive by
providing accurate supplies, correct information, and protection to the
people on a daily basis. SEBI helps investors by creating a malpractice
free environment to attract and protect the money of the people who
invested in the market.
Financial Intermediaries
The intermediaries are the people who act as middlemen between the
issuers and the investors. SEBI helps in creating a competitive
professional market which gives a better service to the issuers and the
investors. They also provide efficient infrastructure and secured financial
transactions.
Organizational Structure of SEBI
The members of the Security and Exchange Board of India are:
 The Chairman who is appointed by the Union Government of India.
 Two members who are selected from the officers of the Union Finance
Ministry.
 One member who is appointed from the Reserve Bank of India.
 The other five members are appointed by the Union Government of
India, out of five three must be whole-time members. Dr. S.A. Dave was
the first Chairman of SEBI who was appointed on 10th April 1988. Ajay
Tyagi is the present Chairman appointed on 10th February 2017
replacing U K Sinha. Functions of SEBI SEBI basically protects the
interest of the investors in the security market, promotes the
development of the security market and regulates the business.
The functions of the Security and Exchange Board of India can primarily
be categorized into three parts:
protective Function
Protective functions are used to protect the interest of investors and
other financial participants. These functions are:
 Prevent Insider Trading: When the people working in the market like
director, promoters or employees working in the company starts to buy
or sell the securities because they have access to the confidential price
which results in affecting the price of the security is known as insider
trading. SEBI restricted companies to buy their own shares from the
secondary market and SEBI also regulates regular check-ups to prevent
insider trading and avoid malpractices.
 Checks price rigging: The malpractices which create unreasonable
fluctuations in the price of the securities with the help of increasing or
decreasing the market price of stocks which results in an immense loss
for the investors or traders are known as price rigging. To prevent price
rigging, SEBI keeps active surveillance on the factors which can promote
price rigging.
 Promotes fair trade practices: SEBI established rules and regulations
and a certain code of conduct in the securities market to restrict
fraudulent and unfair trade practices.
 Providing awareness/financial education for investors: SEBI conducts
seminars both online and offline to educate the investors about insights
into the financial market and money management.
Regulatory Function
Regulatory functions are generally used to check the functioning of the
financial business in the market. They establish rules to regulate the
financial intermediaries and corporates for the efficiency of the market.
These functions are:
 SEBI designed guidelines and code of conduct for efficient working of
financial intermediaries and corporate.
 Established rules for taking over a company.
 Conducts regular inquiries and audits of stock exchanges.
 Regulates the process of mutual funds.
 Registration of brokers, sub-brokers, and merchant bankers is
controlled by SEBI.
 Levying of fees is regulated by SEBI.
 Restrictions on private placement. 
Development Function
The development functions are the steps taken by SEBI to improve the
security of the market through technology. The functions are:
 By providing training sessions to the intermediaries of the market.
 By promoting fair trading and restrictions on malpractices of any kind.
 By introducing the DEMAT format.
 By promoting self-regulating organizations.
 By introducing online trading through registered stock brokers.
 By providing discount brokerage.
Objectives of SEBI
The objectives of SEBI are:
 Protection of investors: The primary objective of SEBI is to protect the
rights and interests of the people in the stock market by guiding them to
a healthy environment and protecting the money involved in the market.
 Prevention of malpractices: The main objective for the formation of
SEBI was to prevent fraud and malpractices related to trading and to
regulate the activities of the stock exchange.
 Promoting fair and proper functioning: SEBI was established to
maintain the functioning of the capital market and to promote
functioning of the stock exchange. They are ordered to keep eyes on the
activities of the financial intermediaries and regulate the securities
industry efficiently.
 Establishing Balance: SEBI has to maintain a balance between the
statutory regulation and self-regulation of the securities industry.
 Establishing a code of conduct: SEBI is required to develop and
regulate a code of conduct to avoid frauds and malpractices caused by
intermediaries such as brokers, underwriters and other people.
Features of SEBI
Sebi is an organization that is responsible for maintaining an
environment that is free from malpractices to restore the confidence of
the general public who invest their hard-earned money in the market.
SEBI controls the bylaws of every stock exchange in the country. SEBI
keeps an eye on all the books of accounts related to the stock exchange
and financial intermediaries to check their irregularities. The features of
the Security and Exchange Board of India are given below:
 Quasi-Judicial SEBI is allowed to conduct hearings and can pass
judgments on unethical cases and fraudulent trade practices. This
feature of SEBI helps to protect transparency, accountability, reliability,
and fairness in the capital market.
 Quasi-Legislative SEBI is allowed to draft legislatures with respect to
the capital market. SEBI drafts rules and regulations to protect the
interests of the investors. For eg: SEBI LODR or Listing Obligation and
Disclosure Requirements. This helps in consolidating and streamlining
the provisions of existing listing agreements for several segments of the
financial market like equity shares. This helps in protecting the market
from malpractices and fraudulent trading activities happening at the bay.
 Quasi-Executive SEBI covers the implementation of the legislation. They
are allowed to file a complaint against any person who violates their rules
and regulations. They also have the power to inspect all the books and
records to check for wrongdoings.
SEBI Act
The Parliament established the Securities and Exchange Board of India
Act,1992 or SEBI Act, 1992 to regulate and develop the securities market
in India. It was further amended to meet the changes in the developing
requirements of the securities market.
Features and Regulations of the Act
Sebi is an organization that is responsible for maintaining an
environment that is free from malpractices to restore the confidence of
the general public who invest their hard-earned money in the market.
SEBI controls the bylaws of every stock exchange in the country. SEBI
keeps an eye on all the books of accounts related to the stock exchange
and financial intermediaries to check their irregularities. SEBI Act
defines and gives powers to the body. The SEBI Act is divided into seven
chapters that provide the rules and regulations associated with the
capital market.
 The First Chapter is an introductory or preliminary chapter of the Act
which provides the title, extent, and definitions of the terms used in the
Act.
 The Second Chapter is the establishment of the Securities and
Exchange Board of India. This chapter deals with management,
employees, meetings, and the office of the board. This provides the
necessary details of the board established by this Act.
 The Third Chapter is the transfer of assets, liabilities, etc. of the
existing Security and Exchange Board to the Board, which means it
declares the provisions to be used to transfer the assets in the case of the
formation of a new board.
 The Fourth Chapter is the powers and functions of the Board. This
chapter helps in mentioning the powers and functions of the board which
are given by the Act. The Board is bound to follow the instructions given
by the act and is not allowed to exploit their powers.
 The Fifth Chapter is the Registration Certificate. It deals with the
documentation involved in the registration of the stockbrokers,
subbrokers, and share transfer agents, etc.
 The Sixth Chapter is finance, accounts, and audits. This chapter
controls all the grants given by the Central Government, funds and
accounts, to ensure the productivity of the board as well as the capital
market.
 The Seventh Chapter miscellaneous, which discusses other topics that
are relevant to the board and the market. To help the board from
avoiding mistakes.
The laws and regulations of the Security and Exchange Board of India
are very important and must be followed seriously by the people who are
entitled or registered with the stock exchange and capital market of
India. The SEBI Act, 1992 is the supreme power of the securities market
of India and has the authority to make laws and regulations. And these
rules and regulations are applied to all the listed companies, their board
of directors, key managerial personnel of such companies, investors, and
all the other companies who are associated with the security market
sector.
The most valuable regulations promoted by SEBI are:
 Regulations on the Issue of Capital and Disclosure Requirements, 2009
These regulations helped with the issues related to capital and disclosure
by improving the trading in securities of the listed companies and
investors in India.
 Regulations on Substantial Acquisition of Shares and Takeovers, 2011
These regulations of SEBI were established to solve difficulties related to
the legal and fair acquisition of shares and takeovers.
 Regulations on Prohibition of Insider Training, 2015 These regulations
introduced new provisions for prohibiting the insider training of
securities and tries to protect the laws for lawful and fair trading in
India.
 The Equity Listing Agreement These provisions were a reminder of the
clauses which mainly dealt with the mandatory compliances to be made
between the stock exchange of India and the listed companies.
Scope of Act the Preamble of the SEBI Act, 1992 provides that SEBI
came into force to cover two objectives:
 To protect the interests of investors in Securities.
 To promote the development and regulations of the securities market.
All the provisions and regulations are made to achieve their goal of
improving the market and to reach their goal. SEBI acts like a mini-state
as it works includes executive, judiciary and legislature. Section 11 of the
SEBI Act allows the board to work on its objective.
SEBI controls:
 The regulations of the stock exchange and capital market.
 Prohibition of fraudulent and unfair trade.
 Improving education and training of intermediaries of the securities
market.
 Promoting investors and registering intermediaries.
 Regulating substantial acquisition of shares and takeovers of
companies.
 Calling for information and records.
 Conducting inquiries of audits and stock exchanges.

SEBI is India’s capital market regulator and is trying to benefit the

investors by:
 Increasing the trading volumes
 Syncing with the Global Markets
 Hedging
SEBI helped the market participants by consolidating their settlement
functions at a single clearing meeting and by reducing the effective
trading cost for investors. The board improved the market by allowing
the contributions of the foreign participants through certain background
checks before entering the Indian Market.