Securities and Exchange Board of India (SEBI)




The securities and exchange board of India was set up on 12th April 1998. The main purpose of setting up SEBI was to develop and regulate stock market in India. In 1992, SEBI act was passed. The act gave statutory powers to SEBI. SEBI began its operations in 1992.


Objective of SEBI

·      To protect the interest of investors
·      To bring professionalism in the working of intermediaries in the capital markets, example – brokers, mutual funds, stock exchanges, demat depositories, etc.
·      To create a good financial climate, so that company can raise long term funds through the issue of securities – shares, and debentures.

Powers of SEBI over stock exchange

·      Power to call periodical returns from recognized stock exchange.
·      Power to call any information or explanation from recognized stock exchange or their members.
·      Power to grant approval of bye-laws of recognized stock exchanges
·      Power to order enquiries relating to affairs of stock exchanges or their members
·      Power to make or amend bye-laws of recognized stock exchanges.
·      Power to control and to regulate stock exchange.



Function of SEBI


1.   Protection of investors interest

SEBI frames rules and regulations to protect the interest of investors. It monitors whether the concerned parties are following the rules and regulations. Example – issuing company, mutual funds, brokers and other . SEBI handles investors complaints against brokers, company issuing securities and agencies connected with issue or management of securities.

SEBI has introduced investor protection and education fund. The fund is utilised for the purpose of protection of investor and promotion of investor education and awareness.


2.   Regulates working of mutual funds

SEBI regulates the working of mutual funds. For this purpose, SEBI has laid down rules and regulations that are to be followed by mutual funds, SEBI has prescribed the SEBI (mutual funds) regulations, 1993. Necessary modification are made in the regulations from time to time.

The regulations are to be complied with by all mutual funds in India. SEBI may cancel the registration of a mutual funds, if it fails to comply with the regulations.



3.   Prohibition on insider trading

SEBI has prohibited insider-trading activity. SEBI regulation states that no insider shall-either on his own behalf or on behalf of any other person, deal in securities of a company listed on any stock exchange on the basis of any unpublished price sensitive information.



4.   Regulates merchant banking

SEBI has laid down regulations in respect of merchant banking activities in India. SEBI has laid down SEBI (merchant bankers) regulations 1992 which are to be followed by all merchant bankers in India. The regulations are in respect of registration, code of conduct to be followed, submission of half-yearly results, and so on.


5.   Regulates stock brokers activities

SEBI has also laid down regulations in respect of brokers and sub-brokers. No broker or sub-broker can buy, sell or deal in securities without being a registered member of SEBI. Registration enables SEBI to regulate stock broker activity.

In august 2014, SEBI cleared a proposal for one time registration process for stock brokers and clearing entities that would allow them to operate across stock exchanges.

Under the new norms, stock brokers and clearing members would be required to have only single certificate of registration issued by SEBI.

A simple one time process in entire life time of a stock broker would help SEBI prevent duplication of registration process for each stock exchange.



6.   Portfolio management

SEBI has also enacted regulations to regulate the working of portfolio managers. Portfolio managers make investment decisions for individuals and institutions. SEBI has laid down that no person or institution can operate as a portfolio manager without the registration. The portfolio managers have to follow the relevant regulations.



7.   Regulates take over and mergers

SEBI has issued a set of guidelines to protect the interest of the investors in the case of take over and mergers. SEBI guidelines are to be followed by corporations at the time of take over mergers, etc.

The SEBI regulations, 1997 and its subsequent amendment aim at making the take-over process transparent, and also  protect the interest of minority shareholders.



8.   Research and publicity
SEBI conducts surveys in respect of investments and opportunity. SEBI bring out monthly bulletins covering articles relating to developments in the securities market, economic development etc


Some of the news and publication of SEBI include.
·      Press releases
·      SEBI bulletins
·      Annual reports
·      SEBI DRG studies
·      Public notices
·      Public interest disclosure
·      News clarifications
·      Handbook of statistics
·      Speeches
·      Working papers


9.   Monitoring of stock exchanges

SEBI plays an important role in monitoring stock exchanges, in order to improve the working of stock markets in India. The role is stated below:

a.    Submission of annual report

Every recognized stock exchange has to furnish to SEBI annually with a report about its activity during the previous year. The report should contain the following details:
·      Changes in rules and bye laws, if any
·      Change in the composition of the governing body
·      Any new committee was set up and changes in the composition of existing one.
·      Admissions, re-admission, deaths or resignation of members.
·      Disciplinary action taken members, etc.

b.   Submission of periodical returns:

Periodical returns have to be submitted by the stock exchanges to SEBI relating to:
·      The official rates for securities listed
·      The number of shares delivered through the clearing house.
·      The number of securities listed and delisted during the pervious three months, etc.


10.    Capital market reform by SEBI

SEBI introduces reform in capital markets to make it more effective. In recent years, SEBI has introduced several capital market reforms, in order to improve the performance of capital or stock markets. Some of the important reforms.

·      Buy back of shares is allowed to reduce the chances of hostile take – over
·      Corporate government introduced, whereby the board of directors must govern the listed company properly in the interest of shareholders, and other stakeholders.
·      Demat of shares has been introduced to do away with the problem of physical transfer of shares.
·      For transparency in brokers transactions – rules have been introduced.
·      PAN is made compulsory for investors to trade on stock exchanges.



11.  Guideline on capital issues

SEBI has framed necessary guidelines in connection with capital issues. The guidelines are applicable to:
·      First public issue of new companies
·      First public issue by existing private / closely held companies.
·      Public issue by existing listed companies.
·      It prohibits fraudulent and unfair trade practices relating to securities market.
·      It promotes and regulates self-regulatory organisations.
·      It promotes investors education, and also training of intermediaries in securities market.
·      It conducts inspection, inquiries and audits of stock exchanges and intermediaries and self – regulatory organisations in securities market.