What is SEBI

To keep a close eye on market activities, stock markets worldwide have a watchdog that ensures that participants are not affected by the frivolous activities of another participant. SEBI has been created to ensure that market activities are free and fair. SEBI, being a market regulator, aims to create a balance in the day today’s stock market activities through regulatory frameworks established by it. Of the 17 exchanges currently operating in India, all, including NSE and BSE, are regulated by SEBI guidelines. Before SEBI, the control of capital issues was the authority. It derived power from the Capital Issues (Control Act) 1947. Due to the amendment of 1999, collective investment schemes for brought under SEBI except for Nidhis, chit funds, and cooperatives.

About SEBI

The SEBI has headquarters in Mumbai and regional offices in Chennai, New Delhi, Ahmedabad, and Kolkata. The SEBI local offices are in Jaipur, Bangalore, Guwahati, Bhubaneswar, Patna, Kochi, and Chandigarh. Under the securities contract regulation Act 1956, with effect from September 28, 2015, and the regulation of the forward contract Act 1952 got replaced with the product from September 29, 2015, SEBI commenced regulating the commodity derivatives market. SEBI was established in 1988, and later it was given constitutional validity on January 30, 1992, by the government of India by passing the SEBI Act 1992 in the Parliament. However, SEBI, or the security and exchange board of India and its existence, means that the occurrence of any unwanted market activities won’t be so easy. Therefore, on January 10, 2017, Ajay Tyagi was appointed as the chairman and took over as the head by replacing UK Sinha on March 1, 2017. 

The SEBI only has seven board members who are structured as follows:

• The union government of India nominates the chairman.
• Two members are appointed from the union finance ministry.
• One member comes from the reserve Bank of India.
• The union government of India appoints the remaining members them.

The security exchange board of India has to be responsive to three groups that make up the market:

• The issuer of securities.
• The market intermediaries.
• The investor

Powers of SEBI

SEBI has been a statutory body since January 30, 1992, which means it can implement its laws and bylaws on behalf of the country. Hence, SEBI has been vested with the following powers to work efficiently.

• Regulating and approving by laws of stock exchanges- To protect the interests of investors, SEBI has the power to formulate pertinent rules and regulations.
• Inspecting the books of accounts of recognized stock exchanges and asking for periodical returns- To maintain transparency, accountability, and fairness, SEBI can check the books of accounts of stock exchanges.
• Inspect the books of financial intermediaries- To maintain transparency, accountability, and fairness, SEBI can inspect the books of accounts of financial intermediaries.
• Compulsory listing – For some companies to get listed on one or more stock exchanges, SEBI can compel some companies to enlist on the stock exchange.
• Registering the brokers – SEBI is also responsible for registering the brokers to avoid fraud in the market.

Role and functions of SEBI

SEBI has rules and functions that make it an effective and efficient regulatory body. SEBI has to respond to the needs of the groups which constitute the market.

Primary markets: SEBI regulates the primary market through :

1. The regulation of issuers’ access to 
2. the market.
3. Regulation procedures relating to the insurance of securities.

• Disclosure– The disclosure standards are not only limited to accounting information but are extended to other issues related to communications, such as advertisements.
• Corporate governance: SEBI is responsible for improving the standards of corporate governance in India.
• Settlement systems: Trading members settle the running account of clients’ funds after considering the end-of-the-day obligation of funds as of the payment date across all the exchanges.
• Dematerialization of securities: SEBI introduced Demat accounts in 1996 to dematerialize securities and convert all physical share certificates into electronic form.
• Institutionalization of trading and ownership of securities: Financial institutions can hold shares on behalf of their clients.
• Market integrity and insider trading: SEBI works to maintain the market’s integrity and prevent insider trading to ensure safe and secure trading and avoid fraudulent activity. 
• The smooth functioning of the market: They are helping in developing the capital market so that business activities don’t get hampered.
• Stop unethical trading and insider trading: SEBI can pass judgment on unethical trading and insider trading and punish the accused accordingly.
• Imparting training to market participants regularly: SEBI imparts training to market participants to enable them to function in the market efficiently.

Protective function : SEBI protects the interests of investors and also that of other financial participants.

• Prohibits insider trading- The act of buying or selling security by the insiders of a company, like the employees, is known as insider trading. SEBI prohibits companies from buying their shares to prevent this.
• Check price rigging: The unnatural fluctuations in a security price by either increasing or decreasing the market price of the stocks is known as price ragging, and it leaves unexpected losses for the investors. SEBI maintains strict watch to prevent such malpractices.
• Promoting fair practices: SEBI supports reasonable trade practices.
• Financial education provider: SEBI educates investors by conducting online and offline sessions that provide market insights and money management information.

Regulatory Function

• SEBI has formed guidelines and defined the rules, regulations, and code of conduct that financial intermediaries and corporates should follow.
• It is responsible for regulating the process of taking over a company.
• SEBI Conducts inquiries in an audit of stock exchanges.
• It Regulates the working of stock brokers and merchant brokers.

Developmental Functions

• They are training the intermediate that is part of the security market. 
• They introduce trading through electronic means or the internet with the help of registered stock brokers.
• It underwrites an optional system to reduce the cost of the issue.

Objectives of SEBI

The main objective of SEBI is to promote the development of the stock exchange, protection of the interest of investors, and regulation of stock market activities. Accordingly, the objectives of SEBI are as follows:

1. One of the most critical objectives of SEBI is investor protection. It includes protecting the interest of investors by guiding them and providing insurance to secure the investment.
2. Preventing fraudulent practices and Malpractices is related to trading and regulation of the activities of the stock exchange.
3. SEBI creates a code of conduct for financial intermediaries such as brokers, underwriters, etc.
4. To maintain a balance between self-regulation and statutory regulation.

FAQ

• Does SEBI handle customer complaints?

While the entity is directly responsible for the redressal of your complaint, SEBI initiates action against recalcitrant entities because of the failure to redress many investor complaints.

• How do I ask SEBI a question?
•  SEBI’s address, telephone number, fax number, email, and toll-free investor helpline are available online.

• Is SEBI applicable to private companies?
•   The private company having dead security listed on the stock exchange is considered a listed company for the act.