Introduction

Before the creation of SEBI, the Indian securities market was

essentially uncontrolled. In order to protect the interests of investors
who invest in the securities market and to promote the expansion and
growth of the securities industry, SEBI was established in the year
1988. At present, the Securities and Exchanges Board of India (SEBI)
is one of the most important regulatory bodies in charge of overseeing
the Indian securities industry.
History of SEBI
Before SEBI was created, the Capital Issues (Control) Act, of 1947,
which gave the Controller of Capital Issues the authority to regulate,
served as the regulating body.
The Indian stock market faced numerous frauds during the 1970s and
1980s, including unauthorised private placements, insider trading,
disregard for the Companies Act’s requirements, market manipulation,
rule violations, price manipulation, and delays in the distribution of
shares, among other things.
The Committee on the Regulation of the Stock Market was
established by the government in 1984, and it made recommendations
for the creation of a regulatory organisation to monitor and control the
securities market. The committee’s recommendations led to the
establishment of SEBI in 1988 through a law passed by Parliament.
SEBI was established with the purpose of preventing fraud and
preserving market transparency.
After being established in 1988 as a non-statutory organization, the
Securities and Exchange Board of India became a statutory body in
1992 with the enactment of the Securities and Exchange Board of
India Act, 1992.
Purpose of SEBI
The purpose of the Securities and Exchange Board of India is outlined
in the Preamble “…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”
Objectives of SEBI
 Protecting the interest of stock market participants is one of the
important functions of SEBI. It safeguards the interests of
investors by providing advice and making sure that the
investment is secure.
 Preventing fraudulent trading practices and other malpractices
and regulating stock market activity.
 To strike a balance between statutory control and self-regulation
of the securities industry.
 To develop and regulate a code of conduct for intermediaries
such as brokers, underwriters, and aggregators, in order to
prevent fraud and misconduct.
The Headquarters of SEBI is located in the business district of
Bandra Kurla Complex in Mumbai and has regional offices in the
north, east, south, and west in New Delhi, Kolkata, Chennai, and
Ahmedabad, respectively.
Composition of SEBI
Section 4 of the SEBI, Act provides for the composition of the SEBI
board as follows:
The board consists of nine members:
 The Chairman – Nominated by the central government.
 Two members of the officials of the Finance Ministry of the
Central Government.
 One member who is an official of the Reserve Bank of India.
 Other five members – Nominated by the Central Government.
Among these, at least 3 should be full-time members.
Qualification
According to section 4 of the SEBI Act Chairman and members shall
be persons of ability, integrity, and standing who have shown capacity
in dealing with problems relating to the securities market or have
special knowledge or experience of law, finance, economics,
accountancy, administration or in any other discipline which, in the
opinion of the Central Government, shall in be helpful to SEBI.
Powers and function of SEBI :
Section 11 of the Securities and Exchange Board of India Act,
1992 deals with the functions of SEBI which can be broadly divided
into the following heads:
1. Protective functions
2. Regulatory functions
3. Developmental functions
1.Protective function:
The protective function relates to SEBI’s duty to protect the interests
of investors, dealers, and other market participants. SEBI’s
responsibilities in the area of protection include:
 Prohibiting insider trading of securities:
The act of buying or selling securities by insiders of a firm, such as
directors, employees, and promoters, is known as insider trading.
Companies are not permitted to buy their own shares on the secondary
market, as SEBI has done in order to stop such trading.
 Monitoring price rigging:
Price rigging, which results in unanticipated losses for investors, is
the act of generating abnormal changes in the price of securities by
either increasing or decreasing the market price of the equities. To
curtail such malpractices, SEBI maintains a strict watch.
 Prohibit unfair practices:
Companies are not permitted by SEBI to make any claims that might
deceive consumers and encourage them to buy or sell securities by
any other person.
 Educate Investors:
SEBI takes a number of initiatives to educate investors so they may
quickly assess the securities of various companies and choose the
most profitable security.
 Promote fair practice:
The following actions were taken by SEBI to encourage fair practice
and a code of conduct in the securities industry.
 It has guidelines that forbid mid-term changes to the terms in
order to preserve the interests of debenture holders.
 It gives authorities the power to conduct investigations of
allegations relating to insider trading and includes provisions for
stiff fines and imprisonment
 It has also banned the practise of allocating shares in a
preferential manner that is unrelated to market pricing.
2.Regulatory functions
The regulatory duties of SEBI aid the statutory body in monitoring
how market activity is conducted. Establishing rules and regulations
for corporations as well as financial intermediaries is a part of the
regulatory function. SEBI’s responsibilities in the regulatory field
include:
 SEBI has outlined a set of rules and regulations as well as a
code of conduct to regulate intermediaries including
underwriters, brokers, and others.
 SEBI grants licences and regulates the actions of stock brokers,
sub-brokers, share transfer agents, bankers to an issue, trustees
of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers, and any
 other intermediaries who may be associated with the securities
markets in any way.
 registering and controlling the activities of the depositories,
participants, custodians of securities, foreign institutional
investors, credit rating agencies, and other intermediaries as
informed by the board in that regard.
 SEBI regulates substantial acquisition of shares and takeover of
companies.
 SEBI collects information from intermediaries, self-regulatory
groups in the securities market, stock exchanges, mutual funds,
and other people connected to the securities market. SEBI also
conducts inspections, inquiries, and audits of these entities.
 SEBI registers venture capital funds and collective investment
schemes, including mutual funds, and regulates their operations.
3. Developmental functions
Developmental function describes the actions undertaken by SEBI to
promote and develop the activities in the stock exchange and to
increase the business in the stock exchange. it includes educating
investors on how trading and the market work. The following actions
are categorized as developmental functions.
 SEBI encourages the education and training of securities market
intermediaries.
 It makes an effort to promote the stock exchange’s operations.
To achieve this, it employs an approach that is flexible and
adaptable in the following ways:
 Introduction of electronic trading or online trading with the
assistance of certified stock brokers.
 SEBI has made underwriting optional in an effort to lower the
cost of issuance.
  Through the stock exchange, it has enabled primary market
initial public offerings.
 By carrying out research in the necessary and significant area of
the securities market, SEBI releases informative material.
Consequently, the investor and other market participants can
make smart investment decisions.
 SEBI promotes and regulates self-regulatory organizations.
 Encourage fair trade practices and eliminate unfair conduct.
Powers of SEBI
The power of SEBI can be studied under 3 broad categories as
follows:
1. Quasi-Legislative Powers
2. Quasi-executive Powers
3. Quasi-judicial Powers
1. Quasi-Legislative Powers
To ensure the protection of investor interests, SEBI has the authority
to create rules and regulations. Its regulations include things like
disclosure requirements, trading rules, and listing obligations, all of
which were created to prevent fraud.
2. Quasi-executive Powers
In addition to having the authority to create rules and regulations,
SEBI also has the authority to put those rules and regulations into
effect. SEBI has the authority to examine a company’s financial
accounts and statements in order to ensure that businesses are
adhering to SBEI rules and regulations. The regulatory authority may
take legal action by rendering judgment on violators if it discovers
them to be in violation of the rules.
3. Quasi-judicial Powers:
These powers offer SEBI the ability to hold hearings and deliver
judgments in the event that any fraudulent or unethical trading
practices exist. SEBI may make sure that there is fairness and
transparency in the capital markets by using this authority.
Other powers:
1. Power of search and seizure:
In accordance with Section 10, SEBI is authorized to search any
location where it believes any records related to the securities market
are held, including computers, computer discs, and storage devices,
and to confiscate those records if necessary. It has the authority to
issue search warrants under Section 11 of the Act for any location or
set of premises where a person is reasonably believed to have engaged
in conduct that is criminal under the Act, etc.
2. Power of arrest:
Anyone who has committed an offence that is punishable under the
Act may be arrested without a warrant under Section 12 by any SEBI
officer or by any other police officer who holds a rank no lower than
that of an Assistant Superintendent of Police.
3. Power for service or attachment:
In accordance with section 14 of the Act, SEBI or any officer
designated by it in this regard may serve a copy of an order on the
party in question through one of its officers and may also seize the
property of that party while legal action is pending against them.
4. Appointment of officials:
According to Section 19, SEBI is permitted to designate its officials,
staff members, and other individuals as required for the fulfilment of
Act-related duties. Any officer of the government or a law
enforcement organization may be co-opted to serve as a SEBI officer.
5.. Granting sanctions:
In accordance with Section 21, SEBI may authorise the initiation of
any proceedings before the Appellate Tribunal or even take
independent action to authorise prosecution under the Act. It
maintains a thorough record of every proceeding that comes before it.
6. Recovery of dues:
The Board has the authority, under Section 28, to compel payment of
any amounts due under this Act and any other amounts owed by any
individual to the Board under this Act or its rules. The Board may
bring a claim for compensation to a civil court. Any lawsuit filed to
recover money owed to SEBI will not be admissible in the Civil Court
without SEBI’s prior approval.
Conclusion:
India’s securities markets are governed by SEBI, a statutory
regulatory organization. All investors in the Indian capital market are
subject to SEBI regulation. It seeks to promote financial markets
while also aiming to protect investors’ interests by enforcing several
laws and regulations. The presence of SEBI guarantees investors a
hassle-free trading experience.