Roles and Functions of SEBI


The Securities and Exchange Board of India (SEBI) was established on 12 April, 1988 and given statutory powers on 30 January, 1992, through the SEBI Act, 1992. SEBI has its headquarters at Kurla Complex in Mumbai and has various offices in New Delhi, Kolkata, Chennai, Ahmedabad, Bangalore, Kochi and a few more local offices. It serves as interim administrative body for promoting and ensuring orderly and healthy growth of securities market and for the protection of the investors. 

Reasons for Establishment of SEBI

Earlier, there was no regulatory body to watch over the activities of the share market which resulted in huge losses for the common or average investor. Price rigging used to happen, which meant that brokers would call investors based on rumours that were passed around. The investors would trust the brokers and blindly invest money on the stocks that they suggested. Another form of malpractice was insider trading. 

Suppose there existed a company called GJ Enterprises, and X was the director of that company who had some shares in the same company. During a general meeting it was brought to the attention of X that the company was not doing well. Using this inside knowledge to his advantage, he sold off his shares before he faced a loss while the other investors faced a loss. This is called insider trading. Delay in delivery of shares is another reason why SEBI was created. The share certificate would not reach shareholders at the right time and many malpractices used to take place by the time the investors received their certificates. 

Also Read: International Legal Principles on Corruption – Aishwarya Sandeep

Role of Securities and Exchange Board of India 

  • Keeping a check on malpractices in the share market and protecting the interests of investors. 
  • Helping issuers in maintaining a market place where they can raise finances fairly and easily. 
  • Helping investors by providing them the necessary protection and supplying them with accurate and correct information rather than waiting for them to sniff rumours and false informations.
  • Providing a fairly competitive professional market to intermediaries.

Objectives of Securities and Exchange Board of India 

  • Regulate stock exchanges and securities industries in order to promote their orderly functioning
  • Prevent trading malpractices and achieve a balance between self-regulation by the securities industry and its statutory regulation
  • To develop and regulate the code of conduct and fair practices by intermediaries like brokers, merchant bankers, etc with a view of making them competitive and professional at the same time. 

Functions of Securities and Exchange Board of India 

  1. Regulatory Functions

  • Registration of brokers and sub-brokers and other players in the market
  • Registration of mutual funds and collective investment schemes
  • Prohibition of fraudulent and unfair trade practices
  • Controlling insider trading and imposing penalties for such malpractices
  • Performing all the duties of SEBI given under Securities Contracts (Regulation) Act, 1956.
  1. Developmental Functions
  • Educating the investors on how to invest safely
  • Training the intermediaries how to avoid malpractices 
  • Conducting research and publishing useful information to all the market participants without bias 
  1. Protective Functions 
  • Prohibition of fraudulent and unfair trade practices 
  • Controlling insider trading and imposing penalties for such practices 
  • Undertaking steps to protect investors

Aishwarya Says:

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