SEBI
The Securities and Exchange Board of India was established as a statutory body in the year
1992 and the provisions of the Securities and Exchange Board of India Act, 1992 came into
force on January 30, 1992.
The Preamble of the Securities and Exchange Board of India describes the basic functions of
the Securities and Exchange Board of India as "...to protect the interests of investors in
securities and to promote the development of, and to regulate the securities market and
for matters connected therewith or incidental thereto"
The hierarchical structure comprises the following 9 designated officers –
The Chairman – Nominated by the Indian Union Government.
Two members belonging to the Union Finance Ministry of India.
One member belonging to the Reserve Bank of India
Other five members – Nominated by the Union Government of India.
Objectives of SEBI
Following are some of the objectives of the SEBI:
1. Investor Protection: This is one of the most important objectives of setting up SEBI. It
involves protecting the interests of investors by providing guidance and ensuring that the
investment done is safe.
2. Preventing the fraudulent practices and malpractices which are related to trading and
regulation of the activities of the stock exchange
3. To develop a code of conduct for the financial intermediaries such as underwriters,
brokers, etc.
4. To maintain a balance between statutory regulations and self regulation.
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
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.
It is the duty of the Board to protect the interests of investors in securities
Sebi is entrusted with the task of Registering and regulating stockbrokers, investment
advisors, portfolio managers, merchant bankers, underwriters, registrars, share transfer
agents and other associated professionals and entities.
Registering and regulating the working of the depositories, custodians of securities, foreign
institutional investors, credit rating agencies and such other institutions
Registering and regulating the working of the depositories, custodians of securities, foreign
institutional investors, credit rating agencies and such other intermediaries
It inspects the books of accounts of recognized stock exchanges and financial
intermediaries.
Prohibits insider trading: Insider trading is the act of buying or selling of the 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 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.
Regulatory Function: Regulatory functions involve establishment of rules and regulations for
the financial intermediaries along with corporates that helps in efficient management of the
market.
a. SEBI has defined the rules and regulations and formed guidelines and code of conduct
that should be followed by the corporates as well as the financial intermediaries.
b. Regulating the process of taking over of a company.
c. Conducting inquiries and audit of stock exchanges.
d. Regulates the working of stock brokers, merchant brokers.
Developmental Function: Developmental function refers to the steps taken by SEBI in order
to Develop and evolve the Indian Securities Markets to the latest standards.
Enforcing various rules and regulations for smooth functioning of the capital markets and
also approving by-laws of stock exchanges.
Providing the investors with a knowledge of the trading and market function. The following
activities are included as part of developmental function.1. Training of intermediaries who
are a part of the security market.
Introduction of trading through electronic means or through the internet by the help of
registered stock brokers.
Making the underwriting an optional system in order to reduce cost of issue.
Powers of SEBI
The Securities and Exchange Board of India (SEBI) is endowed with extensive powers to
regulate and oversee various aspects of the Indian securities market.
Quasi-Judicial Powers
SEBI has quasi-judicial powers to adjudicate disputes, conduct hearings, and pass orders in
matters related to securities law violations and regulatory enforcement actions.
It appoints adjudicating officers to hear and decide on enforcement cases, issue orders, and
impose penalties or sanctions on individuals and entities found guilty of violating securities
laws and regulations.
SEBI's quasi-judicial proceedings follow principles of natural justice, including the right to be
heard, the right to present evidence, and the right to appeal its decisions.
SEBI's decisions can be challenged through appeals to the Securities Appellate Tribunal (SAT)
and, subsequently, to the courts, providing a mechanism for judicial review of its quasi-
judicial actions.
Quasi-Legislative Powers
SEBI has quasi-legislative powers to make rules, regulations, guidelines, and circulars
governing various aspects of the securities market.
It formulates regulatory frameworks to govern the issuance, trading, listing, and disclosure
of securities, as well as the conduct of market participants.
SEBI's quasi-legislative functions involve rulemaking activities aimed at ensuring investor
protection, market integrity, and the orderly functioning of the securities market.
The regulations are enforceable and binding on market participants, and non-compliance
can result in disciplinary actions and penalties.
Quasi-Executive Powers
SEBI exercises quasi-executive powers to implement and enforce securities laws and
regulations.
It conducts investigations, inquiries, and inspections to gather evidence, detect irregularities,
and enforce compliance with securities laws.
SEBI has the authority to issue directives, impose trading restrictions, and take enforcement
actions against individuals and entities found to have violated securities laws and
regulations.
SEBI's quasi-executive functions involve monitoring market activities, enforcing regulatory
compliance, and maintaining market integrity through proactive interventions and
enforcement measures.
SEBI and the executive Departments
The structure of SEBI comprises over 20 departments, all of which are supervised by their
respective department heads, which in turn are administered by a hierarchy in general.
1. Market Intermediaries Regulation and Supervision Department (MIRSD): This
department is responsible for registration, supervision, compliance monitoring and
inspection of all market intermediaries in respect of all segments of the markets viz. equity,
equity derivatives, debt and debt related derivatives. The department also handles the work
related to action against these intermediaries for violation of regulations.
2. Market Regulation Department (MRD): The Market Regulation Department is responsible
for formulating new policies and supervising the functioning and operations (except relating
to derivatives) of securities exchanges, their subsidiaries, and market institutions such as
Clearing and settlement organizations and Depositories (called Market SROs).
3. Derivatives and New Products Department (DNPD): DNDP is responsible for supervising
the function and operations of derivatives exchange and related market organisations,
conducting inspections and compliance exams, introducing new products to be traded, and
consequent policy changes.
4. Corporation Finance Department (CFD): The Corporation Finance Department deals with
matters relating to
(i) Issuance and listing of securities, including initial and continuous listing requirements
(ii) Scheme of arrangements involving merger/ demerger, amalgamation, reduction in
capital
(ii) corporate governance and accounting/auditing standards
(iii) corporate restructuring through Takeovers/ buy backs
(iv) Social Stock Exchange- Policy Formulation, Regulatory Supervision, Creation of eco-
system etc.
(v) Delisting, etc.
5. Investment Management Department (IMD): The Investment Management Department
is responsible for registering and regulating mutual funds, venture capital funds, foreign
venture capital investors, collective investment schemes, including plantation schemes,
Foreign Institutional Investors, Portfolio Managers and Custodians.
Market
6. Integrated Surveillance Department (ISD): The integrated surveillance department is
responsible for monitoring market activity through market systems, data from other
departments and analytical software. The department would be responsible for recognizing
potentially illegal activities and referrals to investigations, Enforcement or other
departments.
[Link] Finance Investigations Department (IVD): The Integrated Surveillance
department is responsible for market surveillance of all segments of Securities marketThe
Corporation Finance Investigation Department is responsible for carrying out preliminary/
detailed investigations on fraud, diversion/ siphoning or misappropriation of funds; material
mis-statement in financial statements;fraudulent related party transactions; non-compliance
with Objects of the issue of IPO; and suspected diversion of funds, etc.
8. Enforcement Department (EFD): Enforcement Department is responsible for proceedings
related to regulatory action and obtaining redress for violations of securities laws and
regulations against all market participants, issuers and individuals and other entities that
breach securities laws and regulations.
9. Legal Affairs Department (LAD): It is responsible to provide legal counsel to the Board and
to its other departments, and to handle non-enforcement litigation.
10. Enquiries and Adjudications Department (EAD): This department handles quasi judicial
matters and initiates adjudication and report directly to the chairman.
11. The Integrated Surveillance department is responsible for market surveillance of all
segments of Securities market.