Securities and Exchange Board of India Functions, Process And Powers

The Securities and Exchange Board of India (SEBI) serves as the primary regulatory authority that looks at the securities market in India. It ensures that the market functions smoothly, transparently, and efficiently.

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The Functions of Securities and Exchange Board of India

• Regulation of Market: SEBI sets rules for companies to raise money from the public, protecting investors' interests. It requires companies to provide detailed information to help investors make informed decisions and ensure the quality of the companies.

• Development of Market: SEBI works to expand and improve the securities markets by making changes at both small and large scales. Significant improvements include online trading systems, electronic securities, and risk management practices.

• Regulatory Norms: SEBI ensures compliance with its rules by inspecting and investigating registered market participants. It can gather information, issue summons, examine, explore, and take legal action against rule-breakers.

• Investors’ Protection: SEBI helps resolve investors' complaints and issues. It believes informed investors are protected investors, so it promotes investor education and awareness. It provides ways to resolve disputes, like arbitration at stock exchanges, and offers compensation to investors.

How is Securities and Exchange Board of India Organized?

• Chairperson : Nominated by the Government of India, the Chairperson leads SEBI and oversees its functions.
• Two Members from the Union Ministry : These members are from the Union Ministry that deals with finance and the administration of the Companies Act 2013. This is typically the Union Ministry of Finance.
• One Member from the Reserve Bank of India (RBI) : This member represents the central bank's interests and ensures coordination between SEBI and the RBI.
• Five Other Members : These members are appointed by the Government of India. Of these five members, at least three must be whole-time members involved in SEBI's daily operations and decision-making processes.

The Powers of Securities and Exchange Board of India

Regarding Issuers

• Can request information, inspect, inquire, and audit stock exchanges, mutual funds, and related entities.
• Has the authority to prohibit insider trading in securities.

Regarding Investors

• Promotes and regulates self-regulatory organizations.
• Can ban fraudulent and unfair trade practices in the securities markets.
• Regulates major share acquisitions and company takeovers.
• Promotes investor education and trains market intermediaries.

Regarding Intermediaries

• Registers and regulates stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees, registrars, merchant bankers, underwriters, portfolio managers, investment advisers, and other related intermediaries.
• Registers and regulates venture capital funds and collective investment schemes, including mutual funds.

Primary Achievements of Securities and Exchange Board of India

• Electronic Shares: SEBI moved shares from paper to digital form, making trading more accessible and safer.
• Faster Trade Settlements: SEBI reduced the time needed to complete trades.
• Online Trading: SEBI started electronic trading across India, making it quicker and more straightforward.
• Risk Management: SEBI put in place systems to manage risks and keep the market stable.
• Clearing Corporations: SEBI created organizations to handle the finalization of trades smoothly.
• Mutual Funds Growth: SEBI helped the mutual fund industry grow, offering more investment options for people.

Actions Taken for Proper Functioning of Securities and Exchange Board of India

• Investor Education and Protection Fund (IEPF): Set up under the Companies Act 2013 to promote awareness and protect investor interests.
• SCORES Portal: A web-based system where investors can lodge, track, and follow up on complaints.
• Investor Education and Financial Literacy: SEBI has launched several programs to educate investors, like the Securities Market Awareness Campaign and Financial Literacy Centers, to help them make better financial decisions.

Issues Associated with Securities and Exchange Board of India

• SEBI focuses more on market conduct regulation than on prudential regulation.
• SEBI has more legislative and enforcement powers than similar bodies in the US and UK.
• SEBI can impose restrictions based on suspicion, sometimes causing economic harm.
• More prior consultation with the market or a review of regulations is needed, leading to widespread fear of SEBI.
• Enforcement of rules, especially for insider trading, needs to be improved.