What is SEBI? Why was SEBI established?: Everything You Must Know

What is the Role of SEBI in Stock Exchange? An Overview

SEBI (Securities exchange board of India) was established on 12 April 1992 by the government of India, headquartered in Mumbai, Maharashtra. The other regional offices of SEBI are located in New Delhi, Kolkata, Chennai, Bengaluru, Jaipur, Kochi, Lucknow, Shimla, Hyderabad, and Ahmedabad. It has offices in other areas of India.  After the establishment of SEBI, it became an autonomous body with statutory powers. It plays a crucial role in regulating the stock market by protecting the interest of investors and focuses on developing the stock market by imposing laws and regulations. In this article, we will learn what is SEBI, why a regulatory body is required for the stock market, the role of SEBI, and the objectives of SEBI. 

What is SEBI?

In the year 1992, The securities and exchange board of India was established as a statutory body.  It conducts investigations and imposes fines on violators. SEBI was introduced to develop transparency in the Indian stock market and to focus on monitoring the stock market. It protects the interest of investors, issuers of securities, and market participants. SEBI has the authority to check the account books of stock exchanges, and audit the books of market intermediaries such as companies, banks, and registered brokers. The main objective of SEBI is to make it safe for investors by implementing rules and regulations in the stock market. 

Why was SEBI established?

SEBI was established to avoid fraud and maintain transparency in the market. During the 70s and 80s, the Indian stock market faced many frauds such as unofficial private placements, insider trading, non-adherence to provisions of the Companies Act, market manipulation, violation of rules, manipulation of prices, and delay in delivery of shares, etc. This is when SEBI steps in to make it safer for investors by tightening the rules and regulations. Moreover, they bring in rules to make it transparent and operate systematically in the stock market. 

Structure of SEBI

The structure of SEBI comprises nine members. 

• A Chairman, selected by the union government of India
• Two representatives are from the union finance ministry
• One representative from the reserve bank of India. 
• And the remaining five members are selected by the union government of India 

SEBI has different departments and all the departments are controlled by the head of the department. There are around twenty departments under SEBI. 

Some of these departments are: 

• Economic and policy analysis
• Corporation finance 
• Human Resources
• Debt and hybrid securities 
• Investment Management
• Enforcement
• Legal affairs
• Commodity derivatives market regulations 

Important SEBI Rules and Guidelines

SEBI has published many rules and guidelines for investors and stock market participants. Some of the critical SEBI rules and guidelines are:

• Mutual Fund regulations and SEBI
• SEBI Notifications
• Listing Requirements for Listed Companies

Mutual Fund Regulations and SEBI Mutual Funds are regulated by SEBI, the Securities and Exchange Board of India. SEBI regulates mutual funds, pension funds, provident funds, and many other financial institutions in India. It also sets rules for government-sponsored schemes such as PPF, NPS, etc.

There are many rules and guidelines for investors in the stock market. Some of them are mentioned below: 1. Investors must not deal with unlisted companies that do not have a public shareholding 2. Investors cannot trade in the secondary market without a valid PAN card, TIN Card, and Aadhaar card

3. Investors cannot deal with companies listed on the grey market 4. All investors must have an active Demat account to trade in stocks5. The investor should be above 18 years of age and should not be a minor6. Investors must possess a valid KYC (Know Your Customer) document7. An investor should have a minimum trading capital of Rs 2 lakhs

What is the Role of SEBI in Stock Exchange?

The Securities exchange board of India acts as a watchdog for all the stock market participants in India. The goal is to provide a safe environment for the retail investors as well as other participants of the securities market and ensure smooth and efficient working of the stock market. 

SEBI's role in the stock market is important to investors and other market intermediaries. It ensures that the three most important financial market players are taken care of. 

1. Securities issuers: These entities get listed on the stock exchanges and raise funds by issuing shares. The SEBI makes sure that the initial public offering and post-public offer take place transparently. 
2. Investors: Investors are the most important part of the stock market and they are the ones who actively participate in the stock market. SEBI protects these investors by ensuring there is no fraud or stock market manipulation. 
3. Financial sector intermediaries: These intermediaries between the issuers and investors in the stock market make the financial transactions safe and smooth. SEBI takes charge of the activity of the stock market intermediaries. 

Mutual Funds regulations and SEBI

SEBI regulates mutual funds and ensures that the advisors and distributors who sell these products correctly do their job. SEBI ensures all financial advisors abide by a code of ethics and act in their client's best interests at all times.

SEBI also regulates investment banks, asset managers, and other securities firms that provide services to MF investors. Finally, SEBI oversees registrars who issue MF accounts from banks or institutions to individual investors.

SEBI and its regulations protect investors from unscrupulous financial advisors and distributors. The rules help ensure that investors trust the financial products they buy since they know the people selling them act in their best interests.

SEBI is also responsible for making sure that the rules and regulations it sets are enforced. Concerning an investment advisor or distributor, you can file a complaint with SEBI. The regulator has a hotline where people can call in and report any violations they think they've witnessed.

SEBI Notifications

SEBI Notifications are issued by the Securities and Exchange Board of India (SEBI) to regulate the securities market in India. The SEBI issues SEBI notifications for various purposes, including regulating the securities market in India.

The SEBI issues SEBI notifications for various purposes, including regulating the securities market in India. SEBI is an independent body that issues notifications by implementing its policies and laws. The Securities and Exchange Board of India regulates Indian capital markets. It was established in 1988 under the Securities and Exchange Board of India Act, 1992 (SEA).

SEBI is also responsible for ensuring that the securities markets in India are fair and transparent. Security and Exchange Board of India (SEBI) has issued a Corporate Governance circular sent to all listed companies.

MF regulations

SEBI's rules may be familiar. What's their deal?

SEBI was established in 1988 under the Securities and Exchange Board of India Act, 1992.

The organization protects investors' interests in stock exchanges (equity), debt markets, mutual funds, and derivatives trading (futures & options).

It protects investors against market fraud and malpractices. It regulates stocks, bonds, mutual funds, etc.

SEBI was founded in 1988 by the Securities and Exchange Board of India Act of 1992. The organization protects investors' interests in stock exchanges (equity), debt markets, mutual funds, and derivatives trading (futures & options). It protects investors against market fraud and malpractices.

Powers of SEBI

SEBI has three key powers in the stock market:

1. Quasi-Judicial: It has the authority to deliver judgements related to fraud as well as any unfairness activity. 
2. Quasi Executive: It executes rules and regulations to safeguard the interest of investors. Moreover, it can take legal proceedings against the violators. 
3. Quasi Legislative: It has rights to frame guidelines such as trading guidelines, disclosure requirements and listing obligations. 

Functions of SEBI

• SEBI's primary purpose is to take care of the interest of investors in the stock market. 
• It encourages the development of the stock market and controls the market. 
• It offers a platform for investment advisors, portfolio managers, sub-brokers, share transfer agents, merchant bankers, underwriters, bankers, trustees of trust deeds, registrars, and other associated participants. 
• It regulates the working of depositories, custodians of securities, credit card rating participants, and Foreign portfolio investors. 
• It prevents insider trading and any unfair trade practices in the stock market. 
• It prohibits price manipulation of stocks in the securities market. 
• It updates investors about various cautions through media and investors can visit the SEBI office to get answers to their queries. They also educate investors by conducting online and offline classes to provide market insights. 
• They regulate the merger and acquisitions of companies. 

Objectives of SEBI

1. Safeguard the investors of the stock market: The SEBI was established to secure the interest of investors in the financial market. It aims to provide a safe environment for the stock market participants by continuous improvement in its guidelines and measures. 
2. Prevents fraud and malpractices: SEBI's main purpose was to prevent unfair trade and malpractice in the stock market. SEBI has an independent online complaint cell where anyone can complain and resolve their queries. After the establishment of SEBI, the fraud activities in the stock market have reduced and become more transparent than before.
3. Fair functioning: The SEBI safeguards the activities in the stock market. In case of fraud activity, one can file a complaint directly on SEBI's website or complain to SEBI's headquarters.

To conclude, the stock market plays an important role in the country's economic health, and to maintain safety and trust in the market SEBI was established. SEBI maintains transparency and continuous improvement in the stock market which makes it safer for investors and other intermediaries of the stock market.