What is SEBI? And what is its role in Financial Market? |

By Trader Pit

July 9, 2021


Securities and Exchange Board of India (SEBI) is an autonomous statutory body established by an Act of Parliament, the SEBI Act, 1992, under the Ministry of Finance, Government of India. SEBI has its headquarters in Mumbai and a regional office in Delhi.

SEBI stands for Securities and Exchange Board of India. It is a regulatory body that looks to protect the investment of the public in the securities market by monitoring market prices, regulating trading activities and conducting market intelligence. SEBI is headed by the chairman, who is appointed by the Prime Minister of India. The committee is assisted by the chief executive officer, secretary and a chairman.

Understand what SEBI is and its role in the financial market : In the late 1970s, the capital market in India became a new sensation. However, with the increasing popularity of shares, a number of unfair practices have emerged such as price fixing, unofficial private placements, non-compliance with the provisions of the Companies Act, insider trading, violation of stock exchange rules and regulations, late delivery of shares and many others.

It was during this period that the Indian government realized the need to set up a body to stop these abuses and regulate the Indian securities market, as most Indians were beginning to lose confidence in the securities market.

Soon after, in 1988, the Securities and Exchange Board of India (SEBI) was established.

What is SEBI?

Initially, the SEBI acted as a watchdog and did not have the power to monitor and regulate the affairs of the Indian financial market. Nevertheless, in 1992 it was given legal status and became an autonomous body that controlled the country’s entire stock market.  By virtue of its legal status, the SEBI may carry out the following activities.

  1. The SEBI has been given the power to regulate and approve the rules and regulations of the stock exchanges.
  2. It can audit the books of recognized stock exchanges in the country. It may also require regular reports on these exchanges.
  3. The SEBI has been granted the right to audit the books and records of financial intermediaries.
  4. This may discourage companies from signing up.
  5. It can also handle the registration of stockbrokers.

SEBI has its head office in Mumbai and regional offices in Delhi, Chennai, Kolkata and Ahmedabad. You can also find local SEBI offices in Jaipur, Guwahati, Bangalore, Patna, Bhubaneswar, Chandigarh and Kochi.

India currently has 17 stock exchanges, including the NSE and the BSE. SEBI guidelines apply to all such awards.

The organisational structure of SEBI

Mr Ajay Tyagi is the current chairman of SEBI. He was born on the 10th. He was appointed as a member of the Supervisory Board on 1 January 2017 and took office with effect from 1 January 2017. March 2017 succeeding Mr W.K. Singh.

SEBI consists of a president and other board members. The honorary president is appointed by the central government. Of the eight members of the panel, two are appointed by the Union Finance Ministry and one by the RBI. The other five members of the Governing Board shall be appointed by the Union Government.

SEBI objectives

The SEBI is responsible for ensuring the smooth functioning of the securities market in India. It aims to protect the interests of investors and traders in the Indian securities market by ensuring a healthy environment in the securities market and by promoting and regulating the securities market.

Moreover, as mentioned earlier, one of the main reasons for setting up the SEBI was to prevent unfair practices in the Indian capital market.

The key role of SEBI in the Indian financial market

SEBI has to deal with the three major players in the financial market to achieve its objectives.

– Issuer of securities. These are publicly traded companies that finance themselves by issuing shares. SEBI ensures that IPOs and FPO issues can take place in a transparent and robust manner.

– Participants in the capital market, i.e. traders and investors. Financial markets only work because there are traders. The SEBI should ensure that investors do not fall prey to stock market manipulation or fraud.

– Financial intermediaries. They act as intermediaries in the securities market and ensure the smooth and safe functioning of stock exchange transactions. The SEBI oversees the activities of stock exchange intermediaries such as brokers and sub-brokers.

SEBI functions

The SEBI performs the following three main functions to fulfill its mission.

1. Protection functions : SEBI performs these functions to protect the interests of investors and financial institutions. Protective functions include monitoring price formation, preventing insider trading, promoting fair practices, educating investors, and prohibiting misleading and unfair trading practices.

2. Regulatory functions : As a regulator, the SEBI oversees the operation of financial market intermediaries. It develops guidelines and a code of conduct for financial intermediaries and regulates mergers and acquisitions.

The SEBI also conducts investigations and audits of stock exchanges. It acts as a data repository for brokers, sub-brokers, investment bankers and many others. SEBI has the right to levy tax on capital market participants. SEBI regulates not only the intermediaries but also the credit rating agencies.

3. Development functions : SEBI’s list of development tasks also includes training of intermediaries. SEBI promotes fair trade and limits unfair practices. It also provides investors with education and information about the stock market through the funds available at IEPF.

(Video credit: Basic Gyaan)

 

Short note
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Supplement

The stock market is one of the most important indicators of a country’s economic health. If people lose confidence in the market, the number of participants will decrease. In addition, the country will begin to lose foreign direct investment, making it much more difficult to maintain foreign exchange flows into the country.

Before the establishment of SEBI, the Indian stock market was riddled with scams and unscrupulous practices. One of the most famous scams in the Indian stock market is that of Harshad Mehta.

After the advent of the SEBI, the stock market has become healthier and more transparent. Nevertheless, even after the SEBI came into force, there were still scams related to securities. One of the most famous of these scams is that of Ketan Parekh.

Although unscrupulous practices still exist in the Indian capital market, the number of them is quite low. In addition, securities market laws and regulations are updated from time to time. So SEBI is getting stricter in its jurisdiction day by day.

Frequently Asked Questions

What are roles of SEBI?

SEBI is the regulator of the securities market in India. It is responsible for the registration of securities, regulation of securities market, and the enforcement of securities laws.

What is Sebi and define its role and responsibilities?

Sebi is the Securities and Exchange Board of India. It is the regulatory body that oversees the securities market in India. Sebi’s responsibilities include: Regulating the securities market in India. Regulating the securities market in India. Regulating the securities market

What is role of SEBI explain with example?

The Securities and Exchange Board of India (SEBI) is an Indian government agency which regulates the securities market in India.

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About the author

Trader Pit

A yogi who like Finance and Technology. I have been in Indian Stock market for over 12 years now as financial analyst, portfolio manager, trader. Now, I focus on Yoga, Financial Education & Long term investing. 

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