The Securities and Exchange Board of India (SEBI) is the apex regulatory authority for securities markets in India, established in 1988 and given statutory powers through the SEBI Act, 1992. SEBI oversees and regulates the functioning of securities markets to protect investors’ interests, promote market development, and ensure transparency and efficiency in market operations.
History and Establishment
Pre-SEBI Era
The Indian securities market, before SEBI’s establishment, was governed by the Capital Issues (Control) Act, 1947, which was inadequate in handling the growing complexities and volume of the market.
Formation of SEBI
SEBI was formed in 1988 in response to the increasing need for a robust regulatory framework. It gained full statutory powers with the enactment of the SEBI Act in 1992 following the Harshad Mehta scam, which exposed the vulnerabilities and malpractices in the market.
Functions and Powers of SEBI
Regulatory Functions
SEBI regulates the functioning of stock exchanges, securities transactions, and intermediaries to ensure fair practice. It monitors corporate activities, supervises market participants, and enforces rules and regulations.
Developmental Functions
SEBI works on developing the securities market by introducing innovations, expanding investor education, and implementing policies that promote market development and investment culture.
Protective Functions
To protect investors, SEBI fights against insider trading, fraud, and other market malpractices. It has the power to regulate and oversee various participants, including brokers, sub-brokers, and financial intermediaries.
SEBI’s Role in Market Development
Investor Education
SEBI invests significantly in investor education campaigns, providing resources and knowledge to help investors make informed decisions, thereby enhancing market participation and stability.
Innovation and Technology
SEBI encourages the adoption of technology in trading, reducing transaction costs, and increasing efficiency and transparency through initiatives like e-IPO and online grievance redressal systems.
Key Regulations and Guidelines Issued by SEBI
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
This regulation mandates detailed disclosures from listed companies to maintain transparency and inform investors about the companies’ financial health and operations.
SEBI (Prohibition of Insider Trading) Regulations, 2015
This guideline aims to curb the illicit use of non-public information in securities trading, safeguarding the interests of ordinary investors.
Comparison with the U.S. Securities and Exchange Commission (SEC)
Structural Differences
While SEBI functions under the Indian government’s Ministry of Finance, the U.S. SEC operates independently to enforce federal securities laws to protect investors and maintain fair market practices.
Jurisdiction Variances
The primary difference in their jurisdiction is geographic, with SEBI covering the Indian securities market and the SEC regulating the U.S. market. However, both share a common goal of ensuring market integrity and protecting investors.
FAQs: Frequently Asked Questions
What are SEBI’s main objectives?
SEBI’s primary objectives include protecting investor interests, promoting market development, and ensuring fair and efficient market operations.
How does SEBI enforce its regulations?
SEBI enforces its regulations through an elaborate system of audits, inspections, investigations, and enacting punitive measures against non-compliant entities.
How can investors lodge complaints to SEBI?
Investors can lodge their grievances through SEBI’s online complaint redressal system, SCORES (SEBI Complaints Redress System).
Summary
The Securities and Exchange Board of India (SEBI) stands as a crucial entity in India’s financial landscape, steering the securities market toward growth, transparency, and fairness. By balancing its regulatory, developmental, and protective roles, SEBI ensures a secure and thriving market environment for all participants. Understanding SEBI’s functions, history, and regulations helps investors and stakeholders navigate the Indian securities market confidently and securely.
