Introduction
The Securities and Exchange Board of India (SEBI) is the apex regulatory authority for the securities market in India. Established to protect investor interests and ensure the orderly development and regulation of the securities market, SEBI plays a pivotal role in maintaining market integrity and transparency. Its significance makes it a frequent topic in competitive examinations.
Key Facts about SEBI
| Aspect | Details |
|---|---|
| Full Form | Securities and Exchange Board of India |
| Established | 1988 (Statutory powers since 1992) |
| Statutory Status | SEBI Act, 1992 |
| Headquarters | Mumbai, Maharashtra |
| Parent Ministry | Ministry of Finance, Government of India |
| Type | Statutory, Quasi-legislative, Quasi-judicial, Quasi-executive |
| Current Chairman | Appointed by Government of India |
Historical Background
Before SEBI, the Controller of Capital Issues (CCI) regulated the securities market under the Capital Issues (Control) Act, 1947.
The rapid growth of the securities market and several scams in the 1980s highlighted the need for a unified, empowered regulator.
SEBI was established in 1988 and granted statutory powers through the SEBI Act, 1992, following the Harshad Mehta scam.
Objectives of SEBI
| Objective | Description |
|---|---|
| Investor Protection | Safeguard the interests of investors and ensure fair practices in the securities market. |
| Market Development | Promote the development of a robust, efficient, and modern securities market. |
| Market Regulation | Regulate the functioning of the securities market and its intermediaries. |
| Prevention of Malpractices | Prevent fraudulent and unfair trade practices, including insider trading and price rigging. |
| Ensuring Transparency | Enforce timely and accurate disclosures by listed companies. |
Powers of SEBI
| Power Type | Description |
|---|---|
| Quasi-Legislative | Drafts regulations and guidelines for the securities market. |
| Quasi-Judicial | Conducts inquiries, passes rulings, and imposes penalties for violations. |
| Quasi-Executive | Investigates violations, collects evidence, and enforces compliance. |
| Civil Court Powers | Can summon individuals, inspect documents, and conduct search and seizure operations. |
| Regulatory | Registers and regulates intermediaries, mutual funds, and various market participants. |
Functions of SEBI
| Function Type | Key Activities |
|---|---|
| Regulatory | Regulates stock exchanges, brokers, sub-brokers, mutual funds, depositories, and other intermediaries. |
| Developmental | Promotes investor education, training of intermediaries, and adoption of new technologies in the market. |
| Protective | Prohibits insider trading, price rigging, and fraudulent activities; ensures investor safety and fair disclosures. |
| Judicial | Investigates market misconduct and takes action against violators. |
| Advisory | Advises the government on securities market policies and improvements. |
SEBI Organizational Structure
| Position/Body | Appointment/Role |
|---|---|
| Chairman | Appointed by the Government of India |
| Members | – 2 from Ministry of Finance – 1 from Reserve Bank of India – 5 nominated by Government (at least 3 full-time) |
| Departments | Over 20 specialized departments handling various aspects of market regulation |
SEBI and Investor Protection
SEBI ensures investor protection by enforcing strict disclosure norms, prohibiting insider trading, and acting against fraudulent practices.
Investor education and grievance redressal mechanisms are integral to SEBI’s mandate.
SEBI and Market Intermediaries
SEBI registers and regulates stock brokers, merchant bankers, portfolio managers, mutual funds, depositories, and credit rating agencies.
Ensures fair competition and professional standards among intermediaries.
SEBI Act, 1992: Key Features
| Feature | Description |
|---|---|
| Statutory Powers | SEBI empowered to regulate and develop the securities market. |
| Investor Protection Fund | Established to compensate investors in case of losses due to fraud. |
| Enforcement | SEBI can investigate, impose penalties, and initiate legal proceedings against violators. |
| Appellate Mechanism | Securities Appellate Tribunal (SAT) hears appeals against SEBI’s orders. |
Importance of SEBI in the Indian Financial System
Maintains market integrity and boosts investor confidence.
Facilitates capital formation and economic growth.
Aligns Indian securities market practices with global standards.
Frequently Asked Questions (FAQs)
| Question | Answer |
|---|---|
| When was SEBI established? | 1988 (statutory powers since 1992 under SEBI Act, 1992) |
| What is the main objective of SEBI? | Protecting investor interests, regulating and developing the securities market. |
| Who appoints the SEBI chairman? | Government of India |
| What are SEBI’s main functions? | Regulatory, developmental, and protective functions in the securities market. |
| What is SAT? | Securities Appellate Tribunal, which hears appeals against SEBI’s decisions. |
