SYLLABUS

Unit 5:Securities and Exchange Board of

India - SEBI (08 Hrs)

SEBI - Constitution and Objectives of SEBI.

Powers and Functions of SEBI. SEBI
Committees, SEBI Departments, SEBI
Guidelines for Primary and Secondary
Markets. Role of SEBI in the protection of
investor interests.
 Securities Exchange Board of
India
• The Securities and Exchange Board of India
(SEBI) was set up on April 12 1988 to start
with, SEBI was up as a non-statutory body.
• It took almost four years for the government to
bring about a separate legislation called
Securities and Exchange Board of India Act
1992. The Act conferred SEBI comprehensive
powers and all aspects of capital market
operations.
 Objectives of SEBI
• The primary objective of the SEBI is promote
healthy and orderly growth of the securities
market and secure investor protection. For this
purpose, the SEBI monitors the activities of not
only stock exchanges but also merchant
bankers, etc. The objectives of SEBI are as
follows:
• To protect the interest of investor so that there
is a steady flow of savings into the capital
market.
• To protect the rights and interests of investors
 Objectives of SEBI
To regulate the securities market and ensure fair
practices by the issuers of securities so that
they can raise resources at minimum cost.

To promote efficient services by brokers,

merchant bankers and other intermediaries so
that they become competitive and professional.

To develop a code of conduct for intermediate

like brokers, merchant bankers etc to make
them competitive and professional.
 Role of SEBI
• Section 11 of SEBI Act specifies the functions
as follows:
Regulatory & Protective functions:
• Regulation of Stock exchange and self-
regulatory organizations.
• Registration and regulation of stock brokers,
sub-brokers, registrar to all issue, merchant
bankers, underwriters, portfolio mangers and
such other intermediaries who are associated
with securities market
 Role of SEBI
• Registration and regulation of the working of
collective investment schemes including mutual
funds.
• Prohibition of fraudulent and unfair trade
practices relating to securities market.
• Prohibition of insider trading in securities.
• Regulating substantial acquisitions of shares
and takeover of companies.
 Role of SEBI
Developmental functions:
• Promoting investor’s education.
• Training of intermediaries.
• Conducting research and publish information
useful to all market participants.
• Promotion of fair practices and code of conduct
for self-regulatory organizations.
• Promoting self-regulatory organization.
 Powers of SEBI
SEBI has been vested with the following powers:
• To call periodical returns from recognized stock
exchanges.
• To call any information or explanation from
recognized stock exchanges or their members.
• To direct enquiries to be made in relation to
affairs of stock exchanges or their members.
• To grant approval to bye-laws of recognized
stock exchanges.
• To make or amend bye-laws of recognized
stock exchanges.
 Power of SEBI
• To compel listing of securities by public
companies.
• To control and regulate stock exchanges.
• To grant registration to market intermediaries.
• To levy fees or other charges for carrying out
the purpose of regulation.
• To declare applicability of Section 17 of the
Securities Contract (Regulation) Act in any
state or area and to grant licenses to dealers in
securities.
 Organization of SEBI
• Chapter II of the SEBI Act deals with
establishment, incorporation, administration &
management of the board of directors etc.
• The SEBI Act provides for the establishment of
the statutory board consisting of six members.
• The chairman & 2 members are to be
appointed by central govt, one member to be
appointed by the RBI & two members having
experience of securities market to be appointed
by the central govt.
 Organization of SEBI
• SEBI has divided into four operational
department:
• Primary market department: It deals with all
policy matters and regulatory issues relating to
primary market, market intermediaries and
redressal of investor grievances.
• Issue management and intermediaries
department : It is concern with vetting of offered
documents and other things like registrations
regulation and monitoring of issue related to
intermediaries .
 Organization of SEBI
• Secondary market department : It looks after all
the policy and regulatory issues for the
secondary market, administration of the major
stock exchanges and other matters.
• Institutional investment department : It is
concern with framing policy for foreign
institutional investor, mutual fund and other
matters like publications, membership in
international organization etc.
• SEBI has two advisory committee one each for
primary and secondary markets. They provide
inputs in framing policies & regulations.
 ROLE OF SEBI IN INVESTOR
PROTECTION
• Issue of Guidelines: Issue of guidelines for the
purpose of transparency in the stock market.
• Investor surveys : SEBI conducts surveys in
respect of investment and opportunities for the
benefit of small investors.
• Dealing with complaints of investors : The
investors can make complaints to SEBI if they
face problems relating to their investment in
industrial securities and financial assets.
• Public interest advertisements: SEBI issues
public interest advertisements enlighten
investors on the basic features of various
instruments and minimum precautions they
should take before choosing an investment.
The SEBI desires to create awareness among
investors about their rights and about remedies
if problem arise.
• Control over issue of capital: SEBI issued
disclosure and investor protection guidelines in
the interest of investor, which allows the
issuers, complying with the eligibility criteria to
issue securities at market determined rates.
• Screen Based Trading: One of the most
important initiatives by SEBI is to start a
nation wide online fully automated screen
based trading system.
• Reduction in Trading cycles: For reducing
the trading cycle, BTST concept is
introduced i.e T+1 day
• Dematerialization of securities:
• Securities market awareness campaign
• Improvement in the norms of Corporate
Governance like strengthening the
responsibility of audit committee, improving the
quality of financial disclosures, Code of
conduct to be followed, give importance to
whistle blower, policy and restriction of the
term of independent directors.
• Introduction of SCORES (SEBI Complain
online redressal system): Investors can lodge
their complaint though this app against the
listed companies and SEBI registered
intermediaries.