What Is SEBI? – Know Its Powers and Functions

We all have heard about SEBI from some source or other but are you acquainted with the powers and functions of SEBI and what is SEBI? The Securities and Exchange Board of India (SEBI) is the authority that is regulatory for overseeing the market securities in the country. It was established in 1988 as a non-statutory body and later became a statutory body in 1992 under the Securities and Exchange Board Act. SEBI is headquartered in Mumbai and has regional offices in major cities across the country. In this article, we will discuss powers and functions of SEBI.

What is SEBI?

Before moving forward let us deal with the question- What is SEBI? SEBI is the regulatory authority established by statute for the regulation of markets of securities and commodities in India. The entity is owned by the Government of India and was established in 1988. However, until 1992 it was a non-statutory body that did not control the markets much. On 30 January 1992, SEBI was declared an autonomous body. It was entrusted with some statutory powers by the SEBI Act of 1992.

The Securities and Exchange Board of India, headquartered at Bandra Kurla Complex in Mumbai, also has several regional offices in other cities across the country.

Background of SEBI

Since the times SEBI was not established, the market of securities was controlled by government institutions, leading to inconsistency, and inefficiency.

The Indian government granted SEBI new regulatory powers in 2014, allowing it to conduct search and seizure operations and impose tougher penalties for market manipulation and insider trading.

SEBI is among the leading regulatory authorities in the world presently. It plays a crucial role in the growth, regulation, or control of the Indian securities market.

Objectives of SEBI

Below are some of the objectives of SEBI:

• SEBI protects the interests of investors by guiding them and insurance of the safety of the investment made.
• Maintain a balance between legal regulations and self-regulation.
• Prevention of fraudulent practices and unfair practices related to trading and regulation of stock exchange activity
• Evolve a code of conduct for financial intermediaries like underwriters, brokers, etc.

Role of SEBI

The main objective of the establishment of SEBI is to protect the interests of investors in the securities market. It means that the money invested by the public is safe because the investors are investing their hard-earned money hoping for a better return.

• SEBI acts as an issuer of securities: The Securities and Exchange Board of India ensures that IPO (Initial Public Offer) and FPO (Subsequent Public Offer) issues are conducted in a sound and transparent manner. An IPO is a new issue of a company’s shares on the stock market, while an FPO is an issue of additional shares after an initial public offering.

• SEBI acts as a protector for both traders and investors: The SEBI must protect the interests of the investors. It must ensure that the investors do not suffer losses due to any fraud in the stock exchange.

• SEBI acts as financial intermediaries: The body acts as an intermediary in the stock market to ensure that all transactions in the market go smoothly. It also monitors the activities of financial intermediaries like brokers, sub-brokers, NBFC, etc. SEBI acts as a ban on insider trading and checks unfair trading practices related to the securities market.

Composition of SEBI

The corporate structure of SEBI includes various departments which are managed by a Head of Department. Some of these departments are Foreign Portfolio Investors, Human Resources, Collective Investment Schemes, Commodity and Derivatives Market Regulation, Legal Affairs Department, and others. The organizational structure of SEBI consists of 9 members which include:

• A chairman is elected by the central government.
• Two members in the rank of officers of the Union Ministry of Finance.
• One member from the RBI and five other members are selected by the Union Government of India.

Powers of SEBI

SEBI’s primary mandate is to protect the interests of investors and promote the development of the securities market in India. To achieve this objective, SEBI has been entrusted with several powers and functions, some of which are highlighted below.

• Regulatory powers: SEBI was empowered to regulate and supervise all aspects of the securities market, including stock exchanges, intermediaries, and listed companies. It can issue regulations, directives, and circulars to ensure compliance with securities laws and promote transparency and fairness in the market.

• Enforcement powers: SEBI has the power to investigate and take enforcement action against any person or entity that violates securities laws or engages in fraudulent or manipulative practices. It can impose fines, issue directions and initiate legal proceedings against defaulters.

• Investor protection: SEBI protects the interests of investors to achieve its objectives. It does this by ensuring that companies provide accurate and timely information to investors, regulating the activities of brokers and other intermediaries, and promoting investor education and awareness.

• Market development: SEBI also plays an important role in the development of the securities market in India. It supports the listing of new companies, facilitates the introduction of new financial instruments, and promotes transparency and efficiency in the market.

• International cooperation: SEBI works closely with other regulatory authorities and organizations around the world to promote global standards in securities regulation and facilitate cross-border cooperation and information exchange.

Functions of SEBI 

SEBI performs varied functions such as-

• It supports the development of the securities market and regulates business.
• SEBI provides a platform for stockbrokers, sub-brokers, portfolio managers, investment advisers, share transfer agents, bankers, merchant bankers, trustees, registrars, underwriters, and other associated persons to register and regulate the work.
• It manages the activities of participants, foreign portfolio investors, depositories, securities custodians, and rating agencies.
• It prohibits insider trading (fraudulent and unfair business practices of the market of securities).
• It provides investor education about securities market intermediaries.
• Tracks major stock acquisitions and corporate takeovers.
• SEBI looks after research and development to make the securities market efficient at all times.

How are you related to SEBI as an investor?

Apart from its functions mentioned above, SEBI also has certain reporting requirements that listed companies have to comply with. These reports can prove to be valuable sources of information for investors like you, as they give you deeper insight into the financials and other qualitative aspects of the company.

In direct interaction with the SEBI as an investor in the Indian financial markets, the presence and powers of SEBI will ensure that you have fair and hassle-free trading. SEBI also protects the interests of other financial intermediaries and keeps them under control.

Final words

In conclusion, SEBI is a vital institution in the Indian securities market with a broad mandate to protect investors and promote market development. Its powers and functions are essential to ensure transparency, fairness, and efficiency in the market and play a key role in building confidence among investors. 

In case of any query regarding the compliances of SEBI, a team of expert advisors of Legal Window are here to assist you at every step.