SEBI - Securities and Exchange Board of India
Security Investments are the new cool. Investments in different asset classes are rising by the day as people are realising their wealth-generating potential. But do you know who regulates all these investments - from shares to stocks to mutual funds? The Securities and Exchange Board of India (SEBI) is the country's apex capital markets authority. Let's delve into its origins, SEBI meaning, objectives and much more and get a complete overview of the regulatory body.
What is SEBI?
SEBI's full form is the Securities and Exchange Board of India. It is a statutory body established by the Government of India in 1992 under the SEBI Act, 1992 to regulate the Indian securities market. The Ministry of Finance owns the regulatory body. SEBI was set up with the aim of fostering and maintaining transparency in the capital markets. `
SEBI functions as the watchdog of the Indian securities market. It frames and enforces necessary rules to ensure fair trading practices. Investors and companies both benefited from SEBI regulations. Today, the organisation ranks among the world’s top regulatory authorities.
How and When Was SEBI Established?
The Controller of Capital Issues regulated the Indian capital markets before SEBI came into existence. It operated under the statute Capital (Issues) Control Act, 1947. The regulation of the Indian capital markets, however, remained inefficient.
SEBI in India was established first as a non-statutory body in 1998. Later, the SEBI Act of 1992 was passed and SEBI became a statutory body on 30th January 1992. With the passing of this act by the Indian Parliament, it became the official regulator of capital markets.
India witnessed an economic boom in the 90s. The Indian stock market rose exponentially as a result. Therefore, a robust and independent overseer was the need of the hour.
SEBI in India is headquartered in Mumbai. Its head office is situated in the Bandra Kurla Complex. The regional offices are spread across New Delhi, Chennai, Ahmedabad and Kolkata. The SEBI local offices are established in cities like Jaipur, Bangalore, Guwahati, Patna, Chandigarh and Kochi.
A market prospers when an environment of trust and safety is in place. This is where SEBI steps in. Although the board plays multiple roles, here are some of its primary objectives:
- To ensure investor protection.
- To promote and regulate the Indian security markets.
- Ensure that fair trading practices are in place.
SEBI functions refer to the mandatory responsibilities that the body needs to fulfil. It performs a vast range of functions to meet the above-stated objectives.
- SEBI Investor Protection: This is the primary function of the body. It ensures the same by providing updated guidelines to stock listers and establishing adequate redressal mechanisms for investors.
- Supervision: SEBI in India acts as an overseeing body, framing rules and regulations to ensure healthy trading practices. These rules apply to stock exchanges, brokers and investors working in the market. SEBI also has the authority to penalise anyone who violates these rules.
- Managing Stock Exchanges: SEBI oversees multiple stock exchanges operating in the country. SEBI guidelines aim to standardise operations and maintain transparency in these platforms.
- Providing a Platform to Intermediaries: Mediators like banks, stock brokers, merchant bankers and others operate in accordance with SEBI policies.
- Improving the Indian Capital Markets: SEBI’s responsibilities include ensuring the growth of the Indian capital market at global rates. The board constantly updates its policies and introduces new investment instruments to ensure consistent growth.
- Ensure Transparency: SEBI transparency policies mandate companies to honestly disclose the necessary investment-related information.
SEBI issues rules and regulations regarding capital markets operations. Under the ‘Legal’ menu on its website, the following SEBI policies are listed for public reference.
- General Orders
- SEBI guidelines
- Master Circulars
- Gazette Notification
Powers of SEBI
Since SEBI is an independent body, it can frame, enforce and govern the rules related to SEBI capital markets operations. The board has these three main powers:
SEBI’s authority, as the apex body, allows it to frame rules regarding security exchanges. These rules pertain to stock listings, insider trading and other aspects. The main aim is to avoid any form of fraud or malpractice.
Although SEBI is the highest authority, its rules and regulations still need to pass through the Supreme Court of India and Securities Appellate Tribunal.
SEBI enforcement makes sure that all the rules and regulations are followed duly by companies and investors. Executive powers imply that the board not only has the power to enforce these rules but also penalise its violations. The SEBI Act of 1992 also authorises the board to review the financial statements of companies.
The board has also been endowed with legal powers. SEBI can pass judgements and take action against the violations of its framework. This helps minimise scams and fulfils the objective of SEBI investor protection.
Structure of SEBI
Much like the companies it governs, SEBI follows a corporate structure. A chairman leads the board comprising of whole-time and part-time members. The chairman is nominated by the Government of India. Two other members come from the finance ministry, one from the Reserve Bank of India and five more on the suggestions of the Union government.
Take a look at the board’s current position holders.
Madhabi Puri Buch
Whole Time Members
Ananth Narayan G
M. Rajeshwar Rao
Departments of SEBI
SEBI has different departments. These departments help manage the vast Indian securities market by dividing the responsibilities. Take a look at them in the following table.
Alternative Investment Fund and Foreign Portfolio Investors Department (AFD)
Corporation Finance Department (CFD)
Corporation Finance Investigation Department (CFID)
Department of Economic and Policy Analysis (DEPA)
Department of Debt and Hybrid Securities (DDHS)
Enforcement Department - 1 (EFD1)
Enforcement Department - 2 (EFD2)
Enquiries and Adjudication Department (EAD)
General Services Department (GSD)
Recovery and Refund Department (RRD)
Human Resources Department (HRD)
Division of Foreign Portfolio Investors & Custodians (Division of Foreign Portfolio Investors & Custodia)
Information Technology Department (ITD)
Integrated Surveillance Department (ISD)
Investigations Department (IVD)
Investment Management Department (IMD)
Legal Affairs Department 1 (LAD 1)
Legal Affairs Department 2 (LAD2)
Market Intermediaries Regulation and Supervision Department (MIRSD)
Market Regulation Department (MRD)
SEBI Investor Protection
SEBI and Investor Protection go hand in hand. As discussed earlier, this is also one of the primary goals of the board.
The board has also established the SCORES - SEBI Complaints Redress System portal to promptly address investor complaints. Investors can reach out to SEBI for any query through the following channels.
Online SCORES Portal
1800 22 7575
1800 266 7575
Head Office Address
SEBI Bhavan Bandra Kurla Complex (BKC)
Plot No. C4-A, ‘G’ Block
Bandra Kurla Complex,
Mumbai - 400051
Impact of SEBI on Indian Capital Markets
SEBI compliance has kept the Indian capital markets in check. Fraud, scams, fishy trade and other unethical practices have been significantly controlled. With SEBI guidelines in place, investors’ confidence in Indian stock exchanges has increased. Today, everyone is willing to invest in stocks, mutual funds and other securities. This is a testament to SEBI’s success as a regulatory authority.
Recent Initiative of SEBI
SEBI guidelines are regularly updated to keep up with the changing market trends. Take a look at some of the highlighting new regulations issued by the board in this fiscal year so far.
- Recently, SEBI has brought down the materiality threshold. It has mandated all firms to disclose contracts and arrangements related to manufacturing, technical, strategic and marketing affiliations.
- SEBI’s authority mandates the Top 100 companies and the Top 250 companies to clarify rumours floating in mainstream media within 24 hours from October 1, 2023 and April 1, 2024, respectively.
- New rules pertaining to Environment, Social and Governance (ESG) disclosure are also released by the board.
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FAQ About SEBI
What is SEBI in stocks?
SEBI is the regulatory authority for Indian security and capital markets. Investments in stocks, mutual funds and other securities are governed by its rules.
What is the purpose of SEBI in India?
SEBI’s investor protection and securities market regulation are its primary goals.
Who owns SEBI?
SEBI is an independent body governed by the SEBI Act, of 1992 under the Ministry of Finance’s ownership.
Is SEBI a government organisation?
SEBI is an autonomous body. Although it came into existence in 1988, it was granted statutory status in 1992.
What are the regulations enforced by SEBI?
SEBI regulations provide a framework within which the listed companies and investors must operate. One can visit SEBI’s website and click on the ‘Legal’ menu to access all the regulations.
How does SEBI regulate insider trading and market manipulation?
Insider trading is a malpractice where people with an organisation’s insiders leverage the company’s non-public information to trade its securities. According to SEBI policies, a person guilty of it can be fined for up to 10 years in prison, ₹ 25 crore or three times the profit.
Does SEBI have any guidelines for corporate governance in India?
Yes, corporate governance is an important part of SEBI guidelines. These policies are regularly updated to ensure better SEBI investor protection and transparency of operations.