If you are into stock market investing it’s likely that you’ve heard phrases like ‘SEBI circular’, ‘SEBI notification’, ‘SEBI mandate,’ etc. So, what is SEBI? To simply put, SEBI is the capital market regulator. In other words, all transactions in the capital market need to confirm as per the rules of SEBI or the Securities and Exchange Board of India. Read on to know more.

SEBI’s establishment

SEBI was established on 12th April 1988 as a non-statutory regulatory body of the Indian securities market. On 30th January 1992, the Parliament of India passed the SEBI Act, which gave SEBI statutory, autonomous powers and it became the regulator of the Indian capital market.

SEBI’s headquarter is at Bandra Kurla Complex in Mumbai and its Northern, Southern, Eastern and Western regional offices are located in New Delhi, Chennai, Kolkata and Ahmedabad, respectively. Besides, its local branch offices are located in Chandigarh, Patna, Guwahati, Bhubaneshwar, Jaipur, Bangalore and Kochi.

SEBI’s organisational structure

The organisational structure of SEBI consists of nine members:
  • An honourable chairman nominated by the Central Government of India

  • Two members nominated by the Union Finance Ministry

  • One member nominated by the Reserve Bank of India

  • Five other members nominated by the Central Government of India
At present, Shri Ajay Tyagi is the Honourable Chairman of SEBI. He was appointed the chairman on 10th January 2017 and he took charge of his office on 1st March 2017.

SEBI’s objective

According to the Preamble of the Securities and Exchange Board of India (SEBI), its objective is “to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.”

Additionally, one of the prime objectives of SEBI is to curb the malpractices in the capital market of India.

SEBI’s functions

SEBI performs the following three primary functions:

  1. Protective functions:
  2. SEBI’s protective functions include protecting the interests of the investors and financial institutions. Through its protective functions, SEBI keeps a check on price rigging, prevents insider trading, promotes fair practices, creates awareness among investors and prohibits unfair and fraudulent trade practices. It also ensures that IPOs (Initial Public Offering) and FPOs (Follow-on Public Offer) are issued transparently.

  3. Development functions:
  4. One of the most important development functions of SEBI includes providing training to intermediaries (brokers and sub-brokers). It also educates the investors and makes them aware of the Indian stock market.

  5. Regulatory functions:
  6. SEBI’s regulatory functions include monitoring the operations of the intermediaries in the financial market. It drafts the guidelines and code of conduct for the intermediaries and regulates mergers and acquisitions. It also conducts audits of stock exchanges, acts as a registrar for the intermediaries and regulates the credit rating agencies.

SEBI’s powers

SEBI has the following powers:

  1. Quasi-judicial:
  2. SEBI has the authority to deliver judgements pertaining to fraudulent and unethical practices in the stock market.

  1. Quasi-legislative:
  2. SEBI has the authority to draft rules and regulations related to the capital market to protect the interest of the investors.

  1. Quasi-executive:
  2. SEBI also has the power to implement the legislation and conduct investigation in case of any violation of the regulations.
By regulating the capital market of the country, SEBI takes the responsibility of developing and growing the Indian financial market in a healthy manner. It also supervises overseas investment in the domestic financial market and ensures that the process is safe and simple.

This helps in gaining FDIs (Foreign Direct Investment) and FIIs (Foreign Institutional Investor) and substantially increases India’s foreign exchange inflows.

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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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