The Securities and Exchange Board of India (SEBI) is the primary regulator for the securities market in India. Established in 1988 as a non-statutory body, it gained statutory powers on January 30, 1992, through the SEBI Act, 1992.
What is SEBI full form?
SEBI is the short for The Securities and Exchange Board; the regulatory authority in India that is responsible to look into and control securities market for investment to safeguard investors and keeps organization in check without any issues. Stocks of popular companies like Tata, IBM, Gold Securities and many investment schemes are regulated and approved by the SEBI. Some of the main functions of SEBI are:
- Protecting the interests of investors by ensuring they are not misled by false advertisements.
- Promote the development of the securities market.
- Promoting and regulating the securities market
- Regulating the business of stock exchanges and activities of stockbrokers.
- Prevent Insider Trading to avoid owners and related people to scam investors
Markets controlled By SEBI
SEBI (Securities and Exchange Board of India) includes some important markets, which are listed below;
1. The Securities Market
This is the primary area of SEBI’s regulation and includes:
- Primary Market (New Issues Market): This is where companies raise capital by issuing new securities like shares (equity) and bonds (debt) to the public for the first time through Initial Public Offerings (IPOs) and other new issue methods. SEBI sets the rules and regulations for issuing these IPOs , ensuring transparency and investor protection during the capital raising process.
- Secondary Market (Stock Exchanges): This is where already-issued securities are bought and sold between investors. SEBI regulates the functioning of stock exchanges (like the National Stock Exchange of India – NSE and the Bombay Stock Exchange – BSE). Its aim is to ensure fair trading practices and prevent market manipulation,
- Debt Market: This includes the trading of fixed-income securities like government bonds, corporate bonds, and other debt instruments. SEBI lays down regulations for the issuance, listing, and trading of these securities.
2. The Commodity Derivatives Market
Commodity derivatives are financial instruments used for various purposes, including:
- Hedging: Producers and consumers of commodities use derivatives to lock in future prices and protect themselves from price volatility. For example, a farmer might sell futures contracts on their expected harvest to secure a price. Commodities include products like Natural gas, Crude Oil, Coal and more.
- Speculation: Traders and investors aim to profit from predicting the future price movements of commodities by buying or selling derivative contracts.
- Price Discovery: The trading activity in the derivatives market helps to establish future price expectations for commodities, providing valuable information to market participants
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Structure of SEBI
SEBI board comprises nine members. The Board consists of the following members.
- One Chairman of the board who is appointed by the Central Government of India
- One Board member who is appointed by the Central Bank, that is, the RBI
- Two Board members who are hailing from the Union Ministry of Finance
- Five Board members who are elected by the Central Government of India
Functions of SEBI
The following functions in the above graphics will be discussed in detail
Regulatory Function
Regulatory functions involve establishment of rules and regulations for the financial intermediaries along with corporates that helps in efficient management of the market.
The following are some of the regulatory functions.
a. SEBI has defined the rules and regulations and formed guidelines and code of conduct that should be followed by the corporates as well as the financial intermediaries.
b. Regulating the process of taking over of a company.
c. Conducting inquiries and audit of stock exchanges.
d. Regulates the working of stock brokers, merchant brokers.
Developmental Function
Developmental function refers to the steps taken by SEBI in order to provide the investors with a knowledge of the trading and market function. The following activities are included as part of developmental function.
1. Training of intermediaries who are a part of the security market.
2. Introduction of trading through electronic means or through the internet by the help of registered stock brokers.
3. By making the underwriting an optional system in order to reduce cost of issue.
Protective Function
The protective function implies the role that SEBI plays in protecting the investor interest and also that of other financial participants. The protective function includes the following activities.
a. Prohibits insider trading: Insider trading is the act of buying or selling of the securities by the insiders of a company, which includes the directors, employees and promoters .
b. Check price rigging: Sebi helps to check the prices of the securities. Price rigging is the act of causing unnatural fluctuations in the price of securities by either increasing or decreasing the market price of the stocks that leads to unexpected losses for the investors.
c. Promoting fair practices: SEBI promotes fair trade practice and works towards prohibiting fraudulent activities related to trading of securities.
d. Financial education provider: SEBI educates the investors by conducting online and offline sessions that provide information related to market and also money management.
CONCLUSION; In the end, it may conclude that SEBI is not just a regulator; it is a guardian of the Indian financial marketplace, also provides protection to its investors’