Securities & Exchange Board of India (SEBI)
1. Introduction
2. Objective
3. Composition of SEBI
4. Function Of Sebi
1. Introduction
The security market in an economy is that segment of a financial market which raises Long-term
Capital through instruments like shares, securities, bonds, mutual funds, debentures. This market
is known as the security market of economyThe security market in India comprises of a Security
regulator (SEBI), stock exchanges, different share indices, brokers, FIIs,etc.
The security market has two complementary markets –
Primary Markets: It is a market where those instruments are traded directly between the entity
raising capital and the instrument purchasing entity.
Secondary Markets: The market where those instruments of security market are traded among
the primary instrument holders. These transactions require an institutionalized floor for trading,
this platform is known as the stock exchanges.
[Link] of SEBI:
The Securities and Exchange Board of India has been established under the Section 3 of the
SEBI Act of 1992. This act provides for the establishment of SEBI full with statutory powers for
working towards the following :
(a) The protection of interests of the investors in securities market.
(b) The promotion for the development of the securities market.
(c) Work for the regulation of the securities market.
Composition of SEBI:
The Board of Securities & Exchange Board of India (SEBI) is comprised of 9 members,
excluding the Chairman. It is managed by its members, in the following manner:
1. A Chairman is nominated by the Union Government.
2. 2 members of SEBI, are officers from the Union Ministry of Finance.
3. 1 member of SEBI, is from the Reserve Bank of India.
4. There are 3 whole-time members, who are nominated by the Government of India.
5. There are 2 Part-time members, who are also nominated by the Government of India.
6. Presently, the Chairman of SEBI is U.K. Sinha.
The Functions of SEBI:
The regulatory jurisdiction of SEBI extends over corporates(in the issuance of capital and
transfer of securities), in addition to all the intermediaries and individuals associated with the
securities market. SEBI performs the following functions to meet its objectives. These functions
involve protective measures, Developmental activity and regulatory functions.
1. Registering and stock exchanges, merchant banks, mutual funds, underwriers, registrars
to the issues, Brokers, Sub-brokers, transfer agents,etc.
2. Levying various fees and other charges(as 1% of the issue amount of every company
issuing shares kept by it as a caution money in the concerned stock exchange where the
company is enlisted).
3. Promoting the knowledge in investor education.
4. It conducts audit and Inspections of stock exchanges and their various intermediaries.
5. It in involved in performing other concerned functions as may be prescribed to it from
time to time.
6. It Regulates the business in stock exchanges and other securities markets in the
[Link] prohibits Insider Trading by keeping a check when insiders of a company buy
securities of that company.
7. It takes strict action against insider [Link] Insider is any individual who is connected
with the company like its directors or promoters, etc. These ‘insiders’ possess sensitive
information which has potential to affect the prices of the securities in the market.
However, you would point out that such information is not available to common people,
while the insiders can take advantage of this information to make profit. This is known as
Insider Trading.
8. It is involved in registering and regulating the working of players in stock exchanges like
stock brokers, sub-brokers, market makers, etc.
9. It Promotes as well as regulates the self-regulatory organizations also.
10. SEBI prohibites the fraudulent and unfair trade practices in the securities market.
Foreign Exchange Management Act, 1999
1. Introduction
Foreign Exchange Management Act, 1999 (FEMA) came into force by an act of Parliament. It
was enacted on 29 December 1999. This new Act is in consonance with the frameworks of the
World Trade Organisation (WTO). It also paved the way for the Prevention of Money
Laundering Act, 2002 which came into effect from July 1, 2005.
2. Main Features of Foreign Exchange Management Act, 1999
1. It gives powers to the Central Government to regulate the flow of payments to and from a
person situated outside the country.
2. All financial transactions concerning foreign securities or exchange cannot be carried out
without the approval of FEMA. All transactions must be carried out through “Authorised
Persons.”
3. In the general interest of the public, the Government of India can restrict an authorized
individual from carrying out foreign exchange deals within the current account.
4. Empowers RBI to place restrictions on transactions from capital Account even if it is
carried out via an authorized individual.
5. As per this act, Indians residing in India, have the permission to conduct a foreign
exchange, foreign security transactions or the right to hold or own immovable property in
a foreign country in case security, property, or currency was acquired, or owned when the
individual was based outside of the country, or when they inherit the property from
individual staying outside the country.
3. Foreign Exchange Management Act: Salient Feature
Some of the important salient features of the Foreign Exchange Management Act are listed
below.
o Division of foreign exchange dealings into two groups: capital account and current
account dealings.
o It gives the Reserve Bank the authority to define the categories of capital account
transactions and the exchange restrictions that apply to such transactions, in consultation
with the central government.
o It offers provisions for the gradual liberalization of capital account transactions and is
consistent with full current account convertibility.
o As it specifies the regions requiring certain authorization from the Reserve
Bank/Government of India on the acquisition/holding of foreign exchange, it is more
clear in its application.
o A person living in India who had previously resided outside the country is given
complete freedom to own, possess, and transfer any foreign securities or real estate
obtained while residing outside of India.
o Citizens of India who live outside of India are not covered by FEMA.
o Since this is a civil statute, only extreme circumstances allow for arrest for
violations of the Act.
4. Foreign Exchange Management Act: Applicability
The Foreign Exchange Management Act (FEMA) is applicable to all of India as well as to
organizations and offices abroad (which are owned or managed by an Indian Citizen). The head
office of FEMA known as the Enforcement Directorate is located in New Delhi.
The applicability of FEMA includes
1. Foreign exchange.
2. Foreign security.
3. Exportation of any commodity and/or service from India to a country outside India.
4. Importation of any commodity and/or services from outside India.
5. Securities as defined under the Public Debt Act 1994.
6. Purchase, sale, and exchange of any kind (i.e. Transfer).
7. Banking, financial, and insurance services.
8. Any overseas company owned by an NRI (Non-Resident Indian) and the owner is 60% or
more.
9. Any citizen of India, residing in the country or outside (NRI).
The Current Account transactions under the FEMA Act have been categorized into three parts:
1. Transactions that are prohibited by FEMA.
2. The transaction requires the permission of the Central Government.
3. The transaction requires the permission of RBI.