SEBI

Securities and Exchange Board of India: Structure and Powers- An overview

Overview

SEBI plays an essential role in conducting and governing the securities and commodities market in India. SEBI^[1] stands for Securities and Exchange Board of India. It enforces various rules and regulations to regulate the functioning of Indian markets. Considering that the Indian capital markets are one of the biggest in the world, therefore, it needs to be regulated in a systematic order to protect the interests of the investors. In this article, we shall have a complete overview of the Securities and Exchange Board of India.

What is SEBI?

The Securities and Exchange Board of India was established by the Government of India on 12th April 1992. It is a statutory regulatory body that monitors and regulates the Indian capital and securities. It protects the interests of the investors by formulating and devising guidelines and regulations to be followed by the players in the Indian market. The headquarters of SEBI is in Mumbai.

History of Securities and Exchange Board of India

SEBI was instituted first in 1988 as a non-statutory body. In the year 1992 entire framework was overhauled and it led to the creation of an autonomous statutory body. In the year 1995, it got additional statutory powers by the government of India by virtue of amendment in the Securities and Exchange Board of India, 1992.

What led to the Institution of SEBI?

In order to check the malpractices and violations in the securities market, the Securities and Exchange Board of India was formed. Another important reason why the securities and exchange board of India was set up was to protect the rights and interest of the investors and to facilitate growth in the securities market.

Structure of SEBI

The Securities and Exchange Board of India comprises of different departments each being managed by a head. Mr Ajay Tyagi was elected as its chairman, replacing UK Sinha, on 10^th February 2017. It has a corporate framework with each department being headed by an executive director. There are different departments under the Securities and Exchange Board of India. These are as follows:-

• Corporation finance
• Economic and policy analysis
• Human resources
• Commodity derivatives market regulation
• Investment management
• Legal affairs department
• Debt and hybrid securities

SEBI’s organisational structure consists of the following members:

• A chairman of SEBI appointed by the Union Government of India;
• There shall be two officers from the Union Finance Ministry;
• One official member of the Reserve Bank of India (RBI);
• Five other members appointed by the Union Government of India.

Functions of SEBI

The Securities and Exchange Board of India performs a set of functions. These are discussed below:

1. The basic function of SEBI is to protect the interests and rights of the investors in the securities market.
2. It regulates the functioning of the business in the securities market and facilitates the development of the same.
3. It prevents malpractices within the securities market. It also prohibits unfair trade practices.
4. It conducts inquiries and regular audits of the stock exchange.
5. It also provides a platform for different players like portfolio managers, investment advisers, stockbrokers, bankers, etc. in the market to register and regulate work.
6. It conducts various training programmes for intermediaries.
7. The Securities and Exchange Board of India conducts regular research and development to make sure that the securities market is efficient at all times.
8. It keeps the investors aware of the intermediaries of the trade.
9. It also monitors the day to day happenings like the acquisition of shares and take-over of companies.
10.  It further regulates the work of participants, foreign portfolio investors, custodian of securities etc.

Powers of SEBI

The powers of the Securities and Exchange Board of India are divided into three groups, namely:

Quasi-Judicial-

The Securities and Exchange Board of India holds power to deliver judgements with respect to fraud and other unfair practices in the securities market. It has the power to hear and conduct proceedings in such cases. This guarantees fairness, accountability and transparency in the securities market.

Quasi Executive-

The SEBI has the power to implement the rules and regulations and its judgments and has the authority to exercise legal action against violators. In case of violations, it has the power to order for production of documents and to inspect account books.

Quasi Legislative-

The Securities and Exchange Board of India reserves the right to devise rules and regulations for protecting the rights and interests of the investors. This helps in keeping frauds and unfair practices in check. Its regulations comprise of insider trading regulations, disclosure requirements and listing obligation.

SEBI and Mutual Funds

SEBI approves the mutual funds that are managed by AMC’s (Asset Management Companies). It has laid down some regulations for mutual funds. The trustees of the Asset Management Companies ensure that the mutual funds work in compliance with the regulatory body. All mutual funds must register with it except the mutual funds that deal with money markets which have to be registered with the Reserve Bank of India.

A self-regulation agency was recently set up for mutual fund known as the association of mutual funds of India. It emphasised on establishing the Indian mutual fund industry with ethical and professional qualities. The objective of the association of mutual funds of India was to improve the operational standards in order to protect and facilitate mutual funds.

Conclusion

Ever since the incorporation of Securities and Exchange Board of India, investing in the security market has never been the same. Its formation has made sure that no investor shall be the victim of unfair trade practices and practices that may threaten the rights and interests of the investor. The regulatory body has strengthened the infrastructure and its management of the security markets in India. It has through its guidelines, rules and regulations strengthened the Indian securities market.