The Securities and

Exchange Board of
India

SEBI
Conents
 Objectives of SEBI
 Functions of SEBI
 Powers of SEBI
Establishment Of SEBI
 The Securities and Exchange Board
of India was established on April
12, 1992 in accordance with the
provisions of the Securities and
Exchange Board of India Act, 1992.
Preamble
 The Preamble of the Securities and
Exchange Board of India describes the
basic functions of the Securities and
Exchange Board of India as
“…..to protect the interests of
investors in securities and to promote
the development of, and to regulate
the securities market and for matters
connected therewith or incidental
thereto”
Functions
 SEBI has to be responsive to the
needs of three groups, which
constitute the market:
 the issuers of securities
 the investors
 the market intermediaries.
Functions
 Regulating business in stock
exchanges and any other
securities market
Functions
 Registering and regulating the working
of stock-brokers, sub-brokers, share
transfer agents, bankers to an issue,
trustees of trust deeds, registrars to
an issue, merchant bankers,
underwriters, portfolio managers,
investment advisors, and other
intermediaries associated with
securities market
Functions
 Registering and regulating the
working of depositories and
custodians of securities, FII’s,
credit rating agencies
 Registering and regulating the
working of venture capital funds
and collective investment
schemes, including mutual funds
Functions
 Promoting and regulating self
regulatory organizations (SROs)
 Prohibiting fraudulent and unfair
trade practices related to securities
market
 Promoting investors in education
and training intermediaries of
securities market
Functions
 Prohibiting insider trading in
securities
 Regulating substantial acquisition
of shares and takeover of
companies
Functions
 Calling for information from,
undertaking inspection, conducting
inquiries and audits of the stock
exchanges, mutual funds,
intermediaries, and SROs in the
securities market
Functions
 Levying fees and other charges for
carrying out its work
Powers
 Every 2-3 years there has
been a new ‘scam’
Powers
 Each scam has led to SEBI being
conferred with greater powers
 1988 – GOI Resolution
 1992 – SEBI Act
 1995 – New Powers
 Adjudication penalties
 Power to make regulations without GOI approval
 Power to prosecute without GOI approval
 1999 – Appeal provisions strengthened
 2002 – Stringent penalty powers conferred
 2004 – New Ordinance with even more powers
Powers
 SEBI Act delegates power to make regulations
 Central Government approval until 1995
 Now, only tabling in Parliament is required
 Administration by SEBI officials
 Sentencing is also by SEBI officials
 Prosecution too to be done by SEBI
POWERS
 Power to call periodical returns from
recognized Stock Exchanges.
 Power to call any information or
explanation from recognized stock
exchanges or their Members.
 Power to direct enquiries to be made
in relation to affairs of stock
exchanges or their members.
POWERS
 Power to grant approval to bye-laws
of Recognized stock exchanges.
 Power to make or amend bye-laws of
recognized Stock exchanges.
 Power to compel listing of securities
by public Companies.
 Power to control and regulate stock
exchanges.
 Power to grant registration to
market intermediaries.
 Power to levy fees or other charges
for carrying Out the Purpose of
regulation.
THE PENALTIES LEVIED
BY SEBI
 Penalty for failure to furnish
information, return, etc.
 Penalty for failure by any person to
enter into agreement with clients.
 Penalty for failure to redress investors'
grievances.
 Penalty for certain defaults in case of
mutual funds.
THE PENALTIES LEVIED
BY SEBI
 Penalty for failure to observe rules
and regulations by an asset
management company.
 Penalty for failure in case of stock
brokers.
 Penalty for insider trading.
THE PENALTIES LEVIED
BY SEBI
 Penalty for fraudulent and unfair
trade practices.
 Penalty for contravention where no
separate penalty has been provided.
Interesting Facts
 On average, more than one appeal
against an order a day
 Contrary to popular belief: -
 Only 30% orders are appealed
 In 63% cases, SEBI orders are upheld
 Judicial attitude furthers the regulator’s
cause
 Higher the profile, lower the prospect of
success