Securities and Exchange Board of India, Origin, Functions

Securities and Exchange Board of India, also known as SEBI, is a key regulatory authority for the securities market in India. It was established in 1992 through a Government Resolution to protect the interests of investors and regulate the country's securities market. SEBI was given statutory powers through the Securities and Exchange Board of India Act, 1992.

SEBI has made contributions over the years to transform the securities market in India. It has introduced several crucial reforms, including the likes of paperless trading, electronic settlements, T+1 settlement cycles, etc. These reforms have significantly improved the efficiency of the securities market in India.

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Securities and Exchange Board of India

SEBI is the regulatory authority tasked with regulating the securities market and governing the capital market in India. It ensures that the interests of the investors are protected through the smooth functioning of the market. SEBI acts as a watchdog of the Indian securities market. 

It oversees the activities of stockbrokers, merchant bankers, underwriters, portfolio managers, mutual funds, and all other intermediaries involved in securities trading. The Indian securities market is vast, dynamic, and complex. Without regulation, investors could be misled by manipulative practices or a lack of proper disclosures. Hence, SEBI plays a central role in ensuring fair play, encouraging ethical practices, and creating a robust financial ecosystem.

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Origin of Securities and Exchange Board of India

Before the formation of SEBI, the capital market in India was largely unregulated. It was filled with several malpractices, including price rigging, insider trading, lack of transparency, and more. Investors had to face huge losses due to such scams and malpractices. They had nowhere to go. 

• The Government of India, recognizing the need for a regulatory body, first set up SEBI in 1988 as a non-statutory body through an administrative resolution. However, its powers were limited, and it lacked the authority to enforce rules.

• The importance of SEBI became significant after the discovery of the Harshad Mehta Scam of 1992. The SEBI Act, 1992, was then established, which gave SEBI statutory status and wide-ranging powers to regulate the securities market.

• Since then, SEBI has evolved into a strong institution that not only regulates but also guides the securities market toward greater efficiency, stability, and credibility.

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Securities and Exchange Board of India Act, 1992

The Government of India provided SEB with statutory powers under the Securities and Exchange Board of India (SEBI) Act, 1992. The Act was brought to protect the interests of investors in the securities market and regulate its transparency and development. 

The SEBI Act grants the organization extensive powers to deliver its regulatory mandate. The powers under this Act can be categorized into 3 categories, namely - 

quasi-legislative, quasi-executive, and quasi-judicial.

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SEBI Organizational Structure

The Securities and Exchange Board of India functions with a well-structured organizational framework. It is headquartered in Mumbai, Maharashtra. The regional offices are located in New Delhi, Kolkata, Chennai, and Ahmedabad. The current chairman of Securities and Exchange Board of India is Shri Tuhin Kanta Pandey. The organizational structure of SEBI is provided in the table below:

Functions of Securities and Exchange Board of India

SEBI is attributed with several important functions in the securities and capital market of India. Apart from focusing on protecting the interests of the investors. The functions of SEBI can be categorized into three different categories as provided in the table below:

Significance of SEBI

The Securities and Exchange Board of India holds a lot of significance. It can be considered to be one of the important pillars of the Indian economy. The significance of SEBI can be summarized as follows:

• Investor Protection – SEBI ensures that investors are not fed with false information or scammed by fraudulent operators.
• Market Development – By introducing reforms like electronic trading and algorithm-based monitoring, SEBI focuses on modernizing the securities market in India all the time.
• Stability and Transparency – SEBI ensures that companies reveal their accurate financial information, which helps in enhancing market transparency.
• Boost to Economy – A well-regulated securities market of India acts as a catalyst to attract domestic and foreign investments, contributing to capital formation and economic growth.
• Preventing Scams – The strict regulations imposed by SEBI have helped in curbing major scams and restoring investor trust in the system.