ANALYSIS OF THE ROLE OF THE SECURITIES

EXCHANGE BOARD OF INDIA

Abstract

ADVOCATE SNEHA
SUMAN

The economy of India is based on sound financial system that helps in accelerating production,
capital and economic growth of the country. The main objectives of every financial system of
modern economy is to accumulate savings and to develop saving habits among the people. It
also helps the saving to allocate into productive usage such as trade and commerce. The
optimum and efficient use and allocation of the savings helps in increasing the economic growth
of the country. Investment is the indicator of the economy level of the country and it is imperative
to protect the interest of the investors.

ROLE OF SEBI IN PROTECTING THE INVESTORS

Securities Exchange Board of India is mainly concerned with protecting the right of investors
and for this purpose there has been several amendments to the SEBI Act to comply with the
changing need of the capital market. Investors are considered to be the significant component of
the financial market and thus it is the duty of the board to ensure that their rights are protected. In
general parlance investor is the person who invests in business or projects with an intention to
make profit out of the capital incurred by him.1
GRIEVANCES OF THE INVESTORS
Being an integral component of capital market there are numerous problems faced by the
investors. The general complaints that are submitted by the investors against the companies are:
Furnishing of inadequate information or false representation made by the companies in its
prospects, application forms, advertisements and rights offer document.2
Delay in receipt of share certificates, debenture certificates and allotment letters.
Investors are also aggrieved by causing delay in the issuance of bonus or right shares.
1 Functions of SEBI, available at http://universalteacher.com/1/functions-of-SEBI (Last visited on
December 31, 2015).

 Investors also faces problem in regard to the listing of securities with stock exchanges.
Failure to receive notices pertaining to meetings and annual reports also causes grievances to
the investors.
INITIATIVES TAKEN BY SEBI FOR PROTECTING THE INTEREST OF
INVESTORS
Investors are considered to be the backbone of the securities market. They play vital role in
determining the intensity of activity in the economy. SEBI works in the direction of the
welfare of the investors. There are foremost steps taken by SEBI in order to protect the
interest of the investors:
ISSUE OF VARIOUS GUIDELINES - It has issued various guidelines to Companies introducing
new issues in the market related to merchant bankers, portfolio managers, mutual funds and
underwriters. It acts a watchdog and keeps vigilance on all the intermediaries.
PUBLIC INTEREST ADVERTISEMENTS- The reason behind issuance of public interest
advertisement is to enlighten the investors and to make them aware about the precautions that
should be taken by them in order to safeguard their interest. It has introduced several
awareness programs and is working extensively in the area of investor protection.3
ADDRESSING GRIEVANCES OF INVESTORS- One of the essential roles of SEBI is to redress
the grievances of the investors. Non-receipt of refund, allotment letters, non-receipt of
dividend are some major problems faced by the investors.
INVESTOR EDUCATION- Investors education is of prime importance to make investors aware
about their rights and how they can be secured. The two monthly publications are also
introduced by SEBI like market review and newsletter for disseminating information to the
investors regarding their rights and measures that should be taken by them in order to
safeguard their interests.4

2 Dr.Kvsn Jawahar Babu, Investor Protection measures by SEBI, available at

http://prj.co/in/setup/business/paper61.pdf (Last visited on December 27, 2015)
3 Shipra Bansal, Role of SEBI in investor protection, available at http://www.ischolar.in/index.php/sajmmr/article/view/45204 (Last visited on December 28, 2015)
4 Ravi Singhania, SEBI v. Investor Protection, available at
http://www.icsi.edu/docs/webmodules/programmes/33NC/33souvearticlepsvenkitaraman.pdf (Last visited
on December 28, 2015)

 DISCLOSURES- Disclosure of the affairs of the Companies operation is vital in order to assess
the investment decision by the investors. It has made some significant changes in those fields
so that they can ensure much protection to the investors and their investment is not futile.5
ROLE OF SEBI IN CURBING PONZI SCHEMES
The biggest fear that constantly lingers in the mind of investors is the expose to financial
fraud. The designated Watchdog of Securities Market in India, the Securities Exchange
Board of India has failed many a times to protect the interest of investors. New measures are
implemented after the revelation of financial scandals but fraudsters seems to be one step
ahead in this cat and mice game. This scandal that took place recently is considered to be the
most highlighted scandal in the recent memory. This incident raised question mark on the
functioning of SEBI as it intervened too late in protecting the interest of the investors. The
incident is marked as a failure of SEBI in discharging its functions as the collective
investment schemes were run in the name of chit funds which indicated the grave failure of
the state machinery that are considered to be the regulators of the chit funds as per the law of
the country.6
CONCLUSION
Investment is considered crucial for the development of the capital market. Investment is the
indicator of economy level of the country. It is vital to protect the interest of the investors so
that they can be encouraged to make more investments. SEBI was established with the
purpose of regulating the capital market and protecting the interest of the investors. Several
regulations are made by the board for ensuring efficient functioning of the market. It would
not be justified if the effort made by SEBI in improving its position as a regulator of market
is not appreciated. It is extra ordinarily difficult for the market regulators to keep a check on
each activities of the financial market and prevent the scams that take place. But, SEBI by
revising its regulations and by making them more stringent and investors friendly has taken a
commendable step. One of the major steps taken by the government in improving the
condition of the capital market and protecting the interest of the investors was the
amendment of the securities laws of the country. This amendment was most awaited and we
5 Protection of Investors by SEBI, available at http://www.legalserviceindia.com/article/1334-Protection
of the Investors-By-SEBI.html (Last visited on December 31, 2015)
6 TAXMANNS SEBI MANUAL VOLUME 1 (July 2014, 24th Edition)

can expect from the board to act vigilantly and to ensure that no such scams like Saradha and
Sahara takes place in near future.