I

NTRODUCTI
ON:
Ofst
ockexhangeofi
ndi
a
TheSecur
it
iesandExchangeBoar
dofI
ndi
awasest
abl
i
shedonApr
il12,1992i
n
accor
dancewi
tht
hepr
ovi
sionsoft
heSecur
it
iesandExchangeBoar
dofI
ndi
aAct
,
1992.

SEBIi
s managed by si
x member
s one chai
rman (
nomi
nat
ed by Cent
ral
Gov
ernment
),t
womember
s(of
fi
cer
sofcent
ralmi
nist
ri
es)
,onemember(
from RBI
)
andr
emai
ningt
womember
snomi
nat
edbyCent
ral
Gov
ernment
.

ThePr
eambl
eoft
heSecur
it
iesandExchangeBoar
dofI
ndi
adescr
ibest
hebasi
c
f
unct
ionsoft
heSecur
it
iesandExchangeBoar
dofI
ndi
aas
"
..
.t
o pr
otect t
he i
nter
est
s of i
nvest
orsi
n secur
it
ies and t
o pr
omot
ethe
dev
elopmentof
,andt
oregul
atet
hesecur
it
iesmar
ketandf
ormat
ter
sconnect
ed
t
her
ewi
thori
nci
dent
alt
her
eto"

Obj
ect
ivesofSEBI
:
Theov
eral
lobj
ect
ivesofSEBIar
etopr
otectt
hei
nter
estofi
nvest
orsandt
o
pr
omot
ethedev
elopmentofst
ockex
changeandt
oregul
atet
heact
ivi
ti
es
ofst
ockmar
ket
.Theobj
ect
ivesofSEBIar
e:

1.Tor
egul
atet
heact
ivi
ti
esofst
ockexchange.

2.Topr
otectt
her
ight
sofi
nvest
orsandensur
ingsaf
etyt
othei
rinv
est
ment
.

3.Topr
eventf
raudul
entandmal
pract
icesbyhav
ingbal
ancebet
weensel
f
r
egul
ati
onofbusi
nessandi
tsst
atut
oryr
egul
ati
ons.

4.Tor
egul
ateanddev
elopacodeofconductf
ori
nter
medi
ari
essuchas
br
oker
s,under
wri
ter
s,et
c.

NEEDANDI
MPORTANCE:
Wi
tht
hegr
owt
hint
hedeal
i
ngsofst
ockmar
ket
s,l
otofmal
pract
icesal
so
st
art
edi
nst
ockmar
ket
ssuchaspr
icer
iggi
ng,
unof
fi
ci
alpr
emi
um onnew
i
ssue,anddel
ayi
ndel
i
ver
yofshar
es,v
iol
ati
onofr
ulesandr
egul
ati
onsof
st
ockex
changeandl
i
sti
ngr
equi
rement
s.Duet
othesemal
pract
icest
he
cust
omer
sst
art
edl
osi
ngconf
idenceandf
ait
hint
hest
ockexchange.So
gov
ernmentofI
ndi
adeci
dedt
osetupanagencyorr
egul
ator
ybodyknown
asSecur
it
iesExchangeBoar
dofI
ndi
a(SEBI
).

SEBIwassetupwi
tht
hemai
npur
poseofkeepi
ngacheckonmal
pract
ices
andpr
otectt
hei
nter
estofi
nvest
ors.I
twassetupt
omeett
heneedsof
t
hreegr
oups.

1.I
ssuer
s:
Fori
ssuer
sitpr
ovi
desamar
ketpl
acei
nwhi
cht
heycanr
aisef
inancef
air
ly
andeasi
l
y.

2.I
nvest
ors:
Fori
nvest
orsi
tpr
ovi
despr
otect
ionandsuppl
yofaccur
ateandcor
rect
i
nfor
mat
ion.

3.I
nter
medi
ari
es:
Fori
nter
medi
ari
esi
tpr
ovi
desacompet
it
ivepr
ofessi
onal
mar
ket
.

Funct
ionsofSEBI
:
I
nit
ial
l
ySEBIwasanonst
atut
orybodywi
thoutanyst
atut
orypower
.Howev
er,
in1995,
theSEBI
wasgi
venaddi
ti
onal
stat
utor
ypowerbyt
heGov
ernmentofI
ndi
athr
oughanamendmentt
o
t
he
Secur
it
iesandExchangeBoar
dofI
ndi
aAct
,1992.I
nApr
il1988t
heSEBIwasconst
it
utedas
t
her
egul
atorofcapi
tal
mar
ket
sinI
ndi
aunderar
esol
uti
onoft
heGov
ernmentofI
ndi
a.

TheSEBIi
smanagedbyi
tsmember
s,whi
chconsi
stsoff
oll
owi
ng:

1.Thechai
rmanwhoi
snomi
nat
edbyUni
onGov
ernmentofI
ndi
a.

2.Twomember
s,i
.e.
,Of
fi
cer
sfr
om Uni
onFi
nanceMi
nist
ry.
 3.Onememberf
rom t
heReser
veBankofI
ndi
a.

4.Ther
emai
ningf
ivemember
sar
enomi
nat
edbyUni
onGov
ernmentofI
ndi
a,outoft
hem at
l
eastt
hreeshal
lbewhol
e-t
imemember
s.

TheSEBIper
for
msf
unct
ionst
omeeti
tsobj
ect
ives.Tomeett
hree
obj
ect
ivesSEBIhast
hreei
mpor
tantf
unct
ions.Thesear
e:

i
.Pr
otect
ivef
unct
ions

i
i
.Dev
elopment
alf
unct
ions

i
i
i.Regul
ator
yfunct
ions.

1.Pr
otect
iveFunct
ions:
Thesef
unct
ionsar
eper
for
medbySEBIt
opr
otectt
hei
nter
estofi
nvest
or
andpr
ovi
desaf
etyofi
nvest
ment
.

Aspr
otect
ivef
unct
ionsSEBIper
for
msf
oll
owi
ngf
unct
ions:
(
i)
I
tChecksPr
iceRi
ggi
ng:
Pr
icer
iggi
ngr
efer
stomani
pul
ati
ngt
hepr
icesofsecur
it
ieswi
tht
hemai
n
obj
ect
iveofi
nfl
ati
ngordepr
essi
ngt
hemar
ketpr
iceofsecur
it
ies.SEBI
pr
ohi
bit
ssuchpr
act
icebecauset
hiscandef
raudandcheatt
hei
nvest
ors.

(
ii
)
ItPr
ohi
bit
sInsi
dert
radi
ng:
I
nsi
deri
sanyper
sonconnect
edwi
tht
hecompanysuchasdi
rect
ors,
pr
omot
erset
c.Thesei
nsi
der
shav
esensi
ti
vei
nfor
mat
ionwhi
chaf
fect
sthe
pr
icesoft
hesecur
it
ies.Thi
sinf
ormat
ioni
snotav
ail
abl
etopeopl
eatl
arge
butt
hei
nsi
der
sgett
hispr
ivi
l
egedi
nfor
mat
ionbywor
kingi
nsi
det
he
companyandi
ftheyuset
hisi
nfor
mat
iont
omakepr
ofi
t,t
heni
tisknownas
i
nsi
dert
radi
ng,
e.g.
,thedi
rect
orsofacompanymayknowt
hatcompany
wi
l
lissueBonusshar
est
oit
sshar
ehol
der
satt
heendofy
earandt
hey
pur
chaseshar
esf
rom mar
kett
omakepr
ofi
twi
thbonusi
ssue.Thi
sis
knownasi
nsi
dert
radi
ng.SEBIkeepsast
ri
ctcheckwheni
nsi
der
sar
e
buy
ingsecur
it
iesoft
hecompanyandt
akesst
ri
ctact
iononi
nsi
dert
radi
ng.

(
ii
i)
SEBIpr
ohi
bit
sfr
audul
entandUnf
airTr
adePr
act
ices:
SEBIdoesnotal
l
owt
hecompani
est
omakemi
sl
eadi
ngst
atement
swhi
ch
ar
eli
kel
ytoi
nducet
hesal
eorpur
chaseofsecur
it
iesbyanyot
herper
son.

(
iv)
SEBIunder
takesst
epst
oeducat
einv
est
orssot
hatt
heyar
eabl
eto
ev
aluat
ethesecur
it
iesofv
ari
ouscompani
esandsel
ectt
hemostpr
ofi
tabl
e
secur
it
ies.
(
v)
SEBIpr
omot
esf
airpr
act
icesandcodeofconducti
nsecur
it
ymar
ketby
t
aki
ngf
oll
owi
ngst
eps:
(
a)SEBIhasi
ssuedgui
del
i
nest
opr
otectt
hei
nter
estofdebent
ure-
hol
der
s
wher
eincompani
escannotchanget
ermsi
nmi
dter
m.

(
b)SEBIi
sempower
edt
oinv
est
igat
ecasesofi
nsi
dert
radi
ngandhas
pr
ovi
sionsf
orst
if
ffi
neandi
mpr
isonment
.

(
c)SEBIhasst
oppedt
hepr
act
iceofmaki
ngpr
efer
ent
ial
all
otmentof
shar
esunr
elat
edt
omar
ketpr
ices.

2.Dev
elopment
alFunct
ions:
Thesef
unct
ionsar
eper
for
medbyt
heSEBIt
opr
omot
eanddev
elop
act
ivi
ti
esi
nst
ockexchangeandi
ncr
easet
hebusi
nessi
nst
ockexchange.
Underdev
elopment
alcat
egor
iesf
oll
owi
ngf
unct
ionsar
eper
for
medbySEBI
:

(
i)SEBIpr
omot
est
rai
ningofi
nter
medi
ari
esoft
hesecur
it
iesmar
ket
.

(
ii
)SEBIt
ri
est
opr
omot
eact
ivi
ti
esofst
ockexchangebyadopt
ingf
lexi
ble
andadopt
abl
eappr
oachi
nfol
l
owi
ngway
:
(
a)SEBIhasper
mit
tedi
nter
nett
radi
ngt
hroughr
egi
ster
edst
ockbr
oker
s.

(
b)SEBIhasmadeunder
wri
ti
ngopt
ional
tor
educet
hecostofi
ssue.

(
c)Ev
eni
nit
ial
publ
i
cof
ferofpr
imar
ymar
keti
sper
mit
tedt
hroughst
ock
exchange.

3.Regul
ator
yFunct
ions:
Thesef
unct
ionsar
eper
for
medbySEBIt
oregul
atet
hebusi
nessi
nst
ock
exchange.Tor
egul
atet
heact
ivi
ti
esofst
ockexchangef
oll
owi
ngf
unct
ions
ar
eper
for
med:

(
i)SEBIhasf
ramedr
ulesandr
egul
ati
onsandacodeofconductt
oregul
ate
t
hei
nter
medi
ari
essuchasmer
chantbanker
s,br
oker
s,under
wri
ter
s,et
c.

(
ii
)Thesei
nter
medi
ari
eshav
ebeenbr
oughtundert
her
egul
ator
ypur
view
andpr
ivat
epl
acementhasbeenmademor
erest
ri
cti
ve.

(
ii
i)SEBIr
egi
ster
sandr
egul
atest
hewor
kingofst
ockbr
oker
s,sub-
broker
s,
shar
etr
ansf
eragent
s,t
rust
ees,
mer
chantbanker
sandal
lthosewhoar
e
associ
atedwi
thst
ockexchangei
nanymanner
.

(
iv)SEBIr
egi
ster
sandr
egul
atest
hewor
kingofmut
ual
fundset
c.

(
v)SEBIr
egul
atest
akeov
eroft
hecompani
es.

(
vi)SEBIconduct
sinqui
ri
esandaudi
tofst
ockex
changes.

TheOr
gani
sat
ionalSt
ruct
ureofSEBI
:
1.SEBIi
swor
kingasacor
por
atesect
or.

2.I
tsact
ivi
ti
esar
edi
vi
dedi
ntof
ivedepar
tment
s.Eachdepar
tmenti
s
headedbyanexecut
ivedi
rect
or.
3.Theheadof
fi
ceofSEBIi
sinMumbai
andi
thasbr
anchof
fi
cei
nKol
kat
a,
Chennai
andDel
hi.

4.SEBIhasf
ormedt
woadv
isor
ycommi
tt
eest
odeal
wit
hpr
imar
yand
secondar
ymar
ket
s.

5.Thesecommi
tt
eesconsi
stofmar
ketpl
ayer
s,i
nvest
orsassoci
ati
onsand
emi
nentper
sons.

Obj
ect
ivesoft
het
woCommi
tt
eesar
e:
1.Toadv
iseSEBIt
oregul
atei
nter
medi
ari
es.

2.Toadv
iseSEBIoni
ssueofsecur
it
iesi
npr
imar
ymar
ket
.

3.Toadv
iseSEBIondi
scl
osur
erequi
rement
sofcompani
es.

4.Toadv
isef
orchangesi
nlegal
framewor
kandt
omakest
ockexchange
mor
etr
anspar
ent
.

5.Toadv
iseonmat
ter
srel
atedt
oregul
ati
onanddev
elopmentof
secondar
yst
ockexchange.

Thesecommi
tt
eescanonl
yadv
iseSEBIbutt
heycannotf
orceSEBIt
otake
act
ionont
hei
radv
ice.

Concl
usi
on: