Securities and Exchange Board of India

Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory body for regulating the securities market. It became an autonomous body on 30 January 1992 and was accorded statutory powers with the passing of the SEBI Act 1992 by the Indian Parliament. SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai and has Northern, Eastern, Southern, and Western Regional Offices in New Delhi, Kolkata, Chennai, and Ahmedabad respectively. It has opened local offices at Jaipur and Bangalore and has also opened offices at Guwahati, Bhubaneshwar, Patna, Kochi, and Chandigarh in Financial Year 2013–2014.

Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act, 1947.

The SEBI is managed by its members, which consists of the following:

The chairman is nominated by the Union Government of India. Two members, i.e., Officers from the Union Finance Ministry.One member from the Reserve Bank of India.

The remaining five members are nominated by the Union Government of India, out of them at least three shall be whole-time members. After the amendment of 1999, collective investment schemes were brought under SEBI except nidhis, chit funds, and cooperatives.

Powers

For the discharge of its functions efficiently, SEBI has been vested with the following powers:

• to approve by−laws of Securities exchanges.

• to require the Securities exchange to amend their by−laws.

• inspect the books of accounts and call for periodical returns from recognized Securities exchanges.

• inspect the books of accounts of financial intermediaries.

• compel certain companies to list their shares in one or more Securities exchanges.

• registration of Brokers and sub-brokers

SEBI committees

• Technical Advisory Committee

• Committee for review of the structure of infrastructure institutions

• Advisory Committee for the SEBI Investor Protection and Education Fund

• Takeover Regulations Advisory Committee

• Primary Market Advisory Committee (PMAC)

• Secondary Market Advisory Committee (SMAC)

• Mutual Fund Advisory Committee

• Corporate Bonds & Securitisation Advisory Committee

• There are two types of brokers:

• Discount brokers

• Merchant brokers

Purpose of SEBI

The purpose for which SEBI was set up was to provide an environment that paves the way for mobilization and allocation of resources. It provides practices, frameworks, and infrastructure to meet the growing demand.

It meets the needs of the following groups:

• Issuer: For issuers, SEBI provides a marketplace that can be utilized for raising funds.

• Investors: It provides protection and supply of accurate information that is maintained on a regular basis.

• Intermediaries: It provides a competitive market for the intermediaries by arranging for proper infrastructure.

Structure of SEBI

• SEBI board comprises nine members. The Board consists of the following members.

• One Chairman of the board who is appointed by the Central Government of India

• One Board member who is appointed by the Central Bank, that is, the RBI

• Two Board members who are hailing from the Union Ministry of Finance

• Five Board members who are elected by the Central Government of India

Functions of SEBI

SEBI has the following functions

1. Protective Function

2. Regulatory Function

3. Development Function

The following functions will be discussed in detail

1. the Protective Function: The protective function implies the role that SEBI plays in protecting the investor interest and also that of other financial participants. The protective function includes the following activities.

• Prohibits insider trading: Insider trading is the act of buying or selling 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 the 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.

2. Regulatory Function: Regulatory functions involve the establishment of rules and regulations for the financial intermediaries along with corporates that help in the efficient management of the market.

The following are some of the regulatory functions.

• SEBI has defined the rules and regulations and formed guidelines and codes of conduct that should be followed by the corporates as well as the financial intermediaries.

• Regulating the process of taking over a company.

• Conducting inquiries and audits of stock exchanges.

• Regulates the working, stockbrokers merchant brokers.

3. Developmental Function: Developmental function refers to the steps taken by SEBI in order to provide the investors with knowledge of the trading and market function.

The following activities are included as part of the developmental function.

• Training of intermediaries who are a part of the security market.

• Introduction of trading through electronic means or through the internet with the help of registered stock brokers.

• stockbrokers By making the underwriting an optional system in order to reduce the cost of the issue.