SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-
statutory body for regulating the securities market. It became an autonomous body in April 1992
in accordance with the provisions of the SEBI Act 1992. Since then it regulates the market
through its independent powers.

OBJECTIVES OF SEBI:

Securities & Exchange Board of India (SEBI) formed under the SEBI Act, 1992 with the
prime objective of

1. To regulate the Securities Market and ensure fair practices

2. To protect and promote investors interest.
3. To make rules and regulations for the securities market.
4. To promote efficient services.
5. To facilitate an efficient mobilization and allocation of resources

Focus being the greater investor protection, SEBI has become a vigilant
watchdog

FUNCTIONS OF SEBI
The regulation of the capital markets is primarily the responsibility of the
Securities and Exchange Board of India (SEBI),which is located in Mumbai.
Some of the major functions of SEBI are:

• SEBI is expected to regulate the business in stock exchanges and any

other securities markets.

• Registering and regulating the working of collective investment schemes,

including mutual funds is a responsibility of SEBI.

• SEBI is responsible for prohibiting fraudulent and unfair trade practices

relating to securities markets

• Prohibiting insider trading in securities, with the imposition of monetary

penalties, on erring market intermediaries.

• Regulating substantial acquisition of shares and takeover of companies.

 • Calling for information from, carrying out inspection,

conducting inquiries and audits of the stock exchanges and

intermediaries and self regulatory organizations in the securities market.

• To promote investor's education and training of intermediaries of securities

markets.

• Prohibit Fraudulent and Unfair Trade Practices

• It is vested with powers to take action against the practices relating to securities
market manipulation and misleading statements to induce sale/purchase of
securities

DEVELOPMENTAL FUNCTIONS

• Promotes investors education.

• Training of Intermediaries.

• Conducting research & published information.

• Promotion of Fair practices.

• Promoting self-regulatory organizations

ROLE OF SEBI IN CAPITAL MARKET

• Section 11 of the Securities and Exchange Board of India Act.

• Regulation of Business in the Stock Exchanges

A) Review of market operations, organizational structure and administrative control of the

Exchange

• All stock exchanges are required to be Body Corporates.

• The exchange provides a fair, equitable and growing market to investors.

 • The exchange’s organisation, systems and practices are in accordance with the Securities
Contracts (Regulation) Act (SC(R) Act), 1956.

B) Registration and Regulation of the working of intermediaries

• Regulates the working of the depositories [participants], custodians of securities, foreign

institutional investors, credit rating agencies and such other intermediaries.

C) Registration and Regulation of Mutual Funds, Venture Capital Funds and Collective
Investment Schemes

• AMFI-Self Regulatory Organization-'promoting and protecting the interest of mutual

funds and their unit-holders, increasing public awareness of mutual funds, and serving the
investors' interest by defining and maintaining high ethical and professional standards in
the mutual funds industry'.

• Every mutual fund must be registered with SEBI and registration is granted only where
SEBI is satisfied with the background of the fund.

• SEBI has the authority to inspect the books of accounts, records and documents of a
mutual fund, its trustees, AMC and custodian where it deems it necessary

• SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the appointment of
the trustees and their obligations

• Every new scheme launched by a mutual fund needs to be filed with SEBI and SEBI
reviews the document in regard to the disclosures contained in such documents.

• Regulations have been laid down regarding listing of funds, refund procedures, transfer
procedures, disclosures, guaranteeing returns etc

• SEBI has also laid down advertisement code to be followed by a mutual fund in making
any publicity regarding a scheme and its performance

• SEBI has prescribed norms/restrictions for investment management with a view to

minimize/reduce undue investment risks.

• SEBI also has the authority to initiate penal actions against an erring MF.

• In case of a change in the controlling interest of an asset management company, investors

should be given at least 30 days time to exercise their exit option.

D) Promoting & Regulating Self Regulatory Organizations

In order for the SRO to effectively execute its responsibilities, it would be required to be
structured, organized, managed and controlled such that it retains its independence, while
continuing to perform a genuine market development role

E) Prohibiting Fraudulent and Unfair Trade Practices in the Securities Market

SEBI is vested with powers to take action against these practices relating to securities market
manipulation and misleading statements to induce sale/purchase of securities.

F] Prohibition of insider Trading

Stock Watch System, which has been put in place, surveillance over insider trading would be
further strengthened.

G] Investor Education and the training of Intermediaries

1.SEBI distributed the booklet titled “A Quick Reference Guide for Investors” to the investors

2.SEBI also issued a series of advertisement /public notices in national as well as regional
newspapers to educate and caution the investors about the risks associated with the investments
in collective investment schemes

SEBI has also issued messages in the interest of investors on National Channel and Regional
Stations on Doordarshan

H) Inspection and Inquiries

I) Regulating Substantial Acquisition of Shares and Take-overs

J) Performing such functions and Exercising such Powers Under The Provisions of The
Securities Contracts (Regulation) Act, 1956 as may be delegated to it by the Central
Government;

K) Levying Fees or other charges for carrying out the purposes of this section

L) Conducting Research for the above purposes

VETTING BY SEBI

• A company cannot come out with public issue unless Draft Prospectus is filed with
SEBI. Prospectus is a document by way of which the investor gets all the information
pertaining to the company in which they are going to invest. It gives the detailed
information about the Company, Promoter / Directors, group companies, Capital
Structure, Terms of the present issue etc.
• A company cannot file prospectus directly with SEBI. It has to be filed through a
merchant banker. After the preparation of prospectus, the merchant banker along with the
due diligence certificates and other compliances and sends the same to SEBI for Vetting.

• SEBI on receiving the same scrutinizes it and may suggest changes within 21 days of
receipt of prospectus

• The company can come out with a public issue any time within 180 days from the date of
the letter from SEBI or if no letter is received from SEBI, within 180 days from the date
of expiry of 21 days of submission of prospectus with SEBI

• If the issue size is upto Rs. 20 crores then the merchant bankers are required to file
prospectus with the regional office of SEBI falling under the jurisdiction in which
registered office of the company is situated.

• If the issue size is more than Rs. 20 crores, merchant bankers are required to file
prospectus at SEBI, Mumbai office.

ROLE OF SEBI IN CAPITAL MARKET

SEBI’s PRINCIPAL TASKS

• To regulate the business in Stock Exchange and other Securities Market.

• To register and regulate the working of Capital market intermediaries.

• To register and regulate the working of Mutual Funds.

• To promote and regulate Self-regulatory Organization.

• To prohibit fraudulent unfair trade practices in Security Market.

• To promote investors education and training to intermediaries of Capital Market.

• Prohibit insider training in Securities.

• Regulate acquisition of shares and takeover of companies.

 • Performs others functions too.

• Purpose and Aims of SEBI

• Regulating the business in the stock market and other securities market.

• Registering and regulating the working of stock brokers and other intermediaries
associated with the securities market.

• Registering and regulating the working of collective investment schemes

including mutual funds.

• Promoting and regulating the self-regulatory organizations.

• Prohibiting fraudulent and unfair trade practices relating to securities market.

• Promoting investors’ education and training of intermediaries of securities

market.

• Prohibiting insider trading in securities.

• Regulating substantial acquisition of shares and takeover of companies.

SEBI IN INDIA'S CAPITAL MARKET

SEBI from time to time have adopted many rules and regulations for enhancing the Indian
capital market. The recent initiatives undertaken are as follows:

• Sole Control on Brokers:

Under this rule every brokers and sub brokers have to get registration with SEBI and any
stock exchange in India.
• For Underwriters:
For working as an underwriter an asset limit of 20 lakhs has been fixed.

• For Share Prices

According to this law all Indian companies are free to determine their respective share
prices and premiums on the share prices.

• For Mutual Funds

SEBI's introduction of SEBI (Mutual Funds) Regulation in 1993 is to have direct control
on all mutual funds of both public and private sector.