Securities and Exchange Board of India SEBI

Capital is required for the operation of any business. And when we talk about an organization like a company, the Securities and Exchange Board of India plays an important role. What is the Securities and Exchange Board of India, we will learn about it in this article.

The Securities Exchange Board is the regulator of the securities market. Makes rules related to control in the securities market, gets that rule implemented, and has complete control over the securities market, it is called the Securities Exchange Board of India. In India, rules are made mainly on the secondary market i.e. on the stock exchange from SEBI to issue, buy-sell, and transfer of ownership of securities and all the work related to the index by which the stock exchange performs its functions. Securities cannot be exchanged without the regulation of SEBI. Thus, on the one hand, the secondary market guides the exchange of securities, while the interests of the investors are protected by it. Prior to the Securities Exchange Board (SEBI), the Reserve Bank of India controlled the securities market and rules were made and implemented by the Reserve Bank, but the need was felt to set up a separate board independently in the country. In order to generate the confidence of investors and guide and control the securities market, as a result, a bill was passed in 1988 to establish it, which was established on April 12, 1988, in the name of the Security and Exchange Board of India, which was established by the Government of India. It operated under the control of the Ministry of Finance, but the incident of the 1992 stock scam greatly affected the securities market and investors lost confidence in the securities market. Therefore, the Securities Exchange Board was separated from the Ministry of Finance and made independent, after that this board started working independently and kept control over the stock exchange and secondary market.

The National Stock Exchange of India Limited

These markets were being guided from time to time and the confidence of the investors began to be on the stock exchange and the secondary market. As a result, the work of the Stock Exchange started to be executed properly. Hence it came into full force on April 4, 1992, and is currently playing an important role. The credit for the success of the securities market goes to the Securities Exchange Board.

Head Office, Regional Offices, and Offices - The head office of SEBI is located in Mumbai. Presently it has regional offices in Kolkata, Delhi, and Chennai. Along with this, SEBI has the right to establish offices at different places in India as per requirement.

Organization of the Securities Exchange Board of India

The organization of the Securities Exchange Board of India (SEBI) is done in the following way-

(i) The Securities Exchange Board of India (SEBI) shall have a total of nine members in the management, whose nature shall be as follows-

(a) It shall have a Chairman to be appointed by the Central Government.

(b) Two members who shall be officers of the Central Ministry having experience in dealing with Bills and Companies Act to be appointed by the Central Government

(d) five other members to be appointed by the Central Government. Out of these three will be full time members and such members should have knowledge of commerce and companies act and knowledge of economics.

All the above members will be entrusted with the powers and responsibilities under the SEBI Act and will perform the functions subordinate to this Act.

Terms and conditions of service of the Board - The terms and conditions of service of the Chairman and members of the Board shall be as per the rules prescribed by SEBI from time to time. The salary and allowances of the members will be determined by the Central Government and any chairman can be removed from the post prematurely by giving 3 months salary and 3 months notice. Chairman and members can also be removed from the post by giving 3 months' salary and notice as mentioned above.

(ii) SEBI has put in place an organizational structure for the proper execution of its functions. Under this, the following seven sections of SEBI have been determined-

(1) Primary Market- This department supervises, directs, and manages various aspects related to the primary market.

(2) Issue Management and Intermediaries - The work of this department is to oversee the issue of securities by companies and to control the activities of intermediaries.

(3) Subsidiary Market Administration - This department arranges for the regulation and control of the subsidiary market by collecting various information related to the subsidiary market (branch marketing center).

(4) Stock Exchange Center Management - Through this department, SEBI controls the management related work of different Stock Exchange Centers.

(5) Institutional Investment, Acquisition, Research and Publication - This department encourages institutional investors and takes them forward in the investment process and controls their activities. Researches on the basis of the information received and gets the research published along with the findings.

(6) Law - This department studies the laws related to securities and controls the implementation of their provisions. In case of violation of statutory provisions, this department takes legal action. This department is responsible for the action taken against SEBI and also solves other legal problems.

7) Investigation - Through the investigation department, SEBI keeps control over the activities of exchange centers, its intermediaries, unlisted deals in primary markets, fraudulent practices etc. This department also takes necessary measures to prevent unfair trade practices.

Purpose of the establishment of SEBI

Explaining the objectives of the establishment in the preamble of the Securities and Exchange Board of India Act, 1992, it has been said - "To achieve the goal of promotion and development by regulating the securities market and its related and subsequent activities to protect the interests of investors." This introduction is related to protecting the interests of individual and retail investors as well as educating and guiding them. SEBI has been established with the objective of eliminating the prevalent malpractices and establishing a balance between self-regulation and statutory regulation of the securities market. SEBI aims to pave an effective way of pooling resources through the capital market, encourage competition and encourage innovations.

The main objectives of the establishment of the Securities Exchange Board of India are as follows-

(1) To protect the interests of the investors.

(2) Constantly attracting the savings of the public towards the capital market.

(3) To develop and regulate the securities market.

(4) To improve the behavior of the issuers of securities.

(5) To provide liquidity to securities.

(6) Control over the activities of brokers and other intermediaries

(7) Prohibition of insider trading.

(8) To educate the investors.

(9) Providing information on risk elements.

(10) To bring transparency in the dealings of the capital market.

Functions of the Securities and Exchange Board of India

The main function of the Securities Exchange Board of India is mainly to make rules regarding securities dealings and to protect the interests of the investors. In this way, for the execution of such activities, the following tasks have to be completed-

(1) Formulation and implementation of policies and rules in relation to primary markets.

(2) Registration and control of intermediaries of primary market.

(3) Regulation and control of autonomous organizations related to primary market.

(4) Redressal of complaints of investors.

(5) Regulation of investment advisers and underwriters.

(6) Registration and regulation of debenture trustees.

(7) Granting recognition to investment associations and registering them.

(8) To provide proper guidance to the investors.

(9) Formulation of guidelines related to the issue and their implementation.

(10) Counseling the parties related to the issue and informing them about the changed situation

(11) Regulation of public and first rights issues.

(12) Registration of members of stock exchange centers and regulation of work of registered members

(13) Keeping an eye on the indices of Stock Exchange Centers, such as Dolex, Natex, and Sensex etc.

(14) Regulation and control of insider deals. (15) To collect and organize the data and make it available to the concerned parties.

(16) Registration and regulation of sub-brokers and securities agencies.

(17) Regulation and control of all exchange centers.

(18) Studying the working system of International Stock Exchange Centers and coordinating it with the prevailing working system in the country.

(19) Regulation and control of venture capital funds, mutual funds, collective funds.

(20) Registration and regulation of Foreign Institutional Investors.

Rights or Powers of the Securities and Exchange Board of India

The powers of SEBI can be explained as follows-

(1) The right to regulate the dealings of securities in the stock exchange.

(2) The right to regulate the actions of the intermediaries of the stock market.

(3) The right to investigate, audit and investigate the activities of stock exchanges, mutual funds, and other intermediaries.

(4) Right to determine fees and charges. (5) Right to receive information and advice from any agency in the performance of its duties.

(6) Right to obtain necessary records and information from any listed or other public limited company on suspicion of involvement in inside trading.

(7) Right to prevent fraudulent practices in the securities market.

(8) Right to search the books and records, etc., of any stock exchange.

(9) The right to give notice to any person to attend office and to take oath from him.

(10) Power to suspend an officer of a stock exchange if he is found guilty.

(11) Right to withhold or confiscate the sale amount of any transaction under investigation.

(12) Power to seal bank accounts with the permission of a Judicial Magistrate of the first class.

(13) The right to prohibit any person or institution from dealing in securities for acting in the interest of the country.

(14) Right to ban the disposal of properties if the intermediary or person connected with the securities market is found guilty.

(15) Right to follow the rules of the SEBI Act.

What are the adjudicatory powers of SEBI?

SEBI has also been given some judicial powers so that it can control the securities market and perform its functions well. In this regard, for the purpose of determining under various penal sections mentioned in the SEBI Act, SEBI may appoint Adjudicating Officer who shall not be below the rank of Regional Head. The Adjudicating Officer has the power to compel the attendance and evidence of any person having knowledge of the facts and circumstances and to determine the appropriate penalty. Along with this, the inquiry officer also gets the power to compel any person to produce necessary records, books, and other useful forms before him. The following facts should be kept in mind while determining the punishment to such Adjudicating Officer-

(i) economic loss caused to the investor or the investing community.

(ii) the amount of profit made inadvertently or appropriately.

(iii) the nature of the repetition of the contravention alleged.

(iv) Determination of the amount of profit made by cheating and fraudulent act and compensation to the aggrieved party.

The above-mentioned important facts should be studied and the table prescribed for various contraventions as mentioned in sub-sections of section 15 of SEBI Act, 1992 regarding penalty in SEBI Act should be taken. For example-

Failure to provide the report, information or details sought by SEBI will attract a penalty under Section 15A (a) at the rate of ₹ 1,00,000 per day and a maximum of ₹ 1 crore or whichever is less. The penalty can be determined through the judicial table as mentioned above.

What are the achievements of SEBI?

Since its formation in 1992 by SEBI, SEBI has been effectively controlling and regulating various parties in the capital market. Amendments have been made in the SEBI Act from time to time. And it has been made more powerful. This is the reason that today investors have developed confidence in the stock exchange in India. After the Bombay Stock Exchange (BSE) scam, the confidence of the investors was lost from the stock exchange, the credit for rebuilding it goes to SEBI. SEBI has removed the shortcomings of another stock exchange and has been guiding from time to time and also providing protection to the investors. Thus due to the dual role BSE of India is being counted among the world class stock exchanges. So we can say that the important contribution of Securities Exchange Board of India (SEBI) has been in the wing of the stock exchange. Following are the important achievements of the Securities Exchange Board of India (SEBI):

(1) Achievement in Primary Market - SEBI has adopted the following reform measures in primary issue market so that proper development of this market can be done because primary market is considered important for capital formation in any country and it is the market where the first New securities are issued every now and then. Therefore, the following measures have been adopted by SEBI for this market-

(i) Strengthening the IPO issue rules.

(ii) Issue above ₹ 100 crores to be made through book-building only

(iii) Preference in allotment to small and middle-class persons. (iv) Compulsory registration of intermediaries and eligibility criteria.

(v) Independent securities issue and pricing policy.

2) Achievement in Secondary Market - The main area of SEBI is the secondary market because it is the market where pre-issued securities are traded and it is essential to control and guide this market. There is a possibility of fraud in this market due to large transactions and it is an important responsibility of SEBI to protect the interests of the investors, due to which many measures have been taken on this market. The main measures are as follows-

(i) Prohibition of insider trading.

(ii) To remove the problems of the investors.

(iii) Keeping brokers under regulation

(iv) Trade settlement period of T + 2.

(v) Monitoring arrangements for adequate compliance.

(vi) Implementation of computerized screen based transaction system.

(vii) Commencement of appointment of corporate members in the stock exchange.

(viii) detailing the disclosures under the listing agreement.

(3) Achievements in Mutual Fund Sector - Mutual is considered an important security and in this regard following reform measures have been taken by SEBI to apply uniform asset valuation method for all mutual funds and uniform accounting rules and methods. Implementation – With the mandatory registration of Mutual Funds by SEBI, the requirement of a separate and independent custodian for the securities of each scheme was implemented.

(4) Achievements in the field of Venture Capital Financing – SEBI has issued detailed regulatory provisions in this regard, including its registration, conditions of investment, company management and keeping of records and books of accounts. SEBI also has the power to inspect, investigate and punish erring venture capital companies.

(5) Stock Banking Regulation - The work practices of stock brokers have remained mostly uncontrolled till now. This party is always blamed for undercutting and indifference towards the investor. SEBI has adopted strict measures to control this, under which registration of brokers will be mandatory. Along with this, eligibility will also have to be obtained. Only such persons can behave as brokers and not otherwise. Thus SEBI has made the code of conduct mandatory. At the same time, it has reserved the right to check accounts and confiscate property.

6) Regulation of portfolio management – Detailed rules have been issued by SEBI regarding the regulation of these advisory services. In this, mandatory registration of portfolio managers, service conditions, available schemes or plans, method of execution, and provisions related to sending social information are important.

(7) Investor Interest Protection - The main function of SEBI is to protect the interests of the investors so that the confidence of the investors remains on the stock exchange and the market. In this direction, from time to time, the company publishes the publication of education funds to the investors through news and tries to solve the problems of the investors SEBI made many efforts in this direction, as a result, in this decade, investors' numbers have increased.

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National Stock Exchange of India NSE

FAQ

1 question - What do you understand by Securities and Exchange Board of India?

Ans -SEBI is a constitutional regulatory body responsible for regulating the securities and commodity markets in India. SEBI was established to regulate the functioning of the markets and to reduce and eliminate frauds. The board of SEBI consists of nine members.

2 question - What is the main objective of SEBI?

Ans- The objective of SEBI is to ensure that the Indian capital market functions in an orderly manner and that investors can get a transparent environment for their investments. Simply put, the primary reason for the establishment of SEBI was to prevent malpractices in the capital market of India and to promote the development of the capital market

3 question - What are the 5 major functions of SEBI?

Ans- Establishing rules for taking over a company. Conducting regular inquiries and audits of stock exchanges. Controlling the process of mutual funds. Registration of brokers, sub-brokers and merchant bankers is regulated by SEBI