SEBI, or the Securities and Exchange Board of India, is a statutory regulatory body established by the Government of India in 1992. Its primary goal is to protect the interests of investors in securities while regulating the securities market, including stock markets and mutual funds.

Objectives of SEBI

SEBI has several key objectives:

1. Investor Protection: Safeguarding investors’ interests is SEBI’s top priority. It provides guidance to ensure safe investment practices.

2. Fraud Prevention: SEBI aims to prevent fraudulent activities and malpractices related to trading in the stock market.

3. Code of Conduct: The board develops guidelines for financial intermediaries, including underwriters and brokers.

4. Balanced Regulation: SEBI strives to maintain a balance between statutory regulations and self-regulation within the industry.

Functions of SEBI

SEBI’s functions can be categorized into three main areas:

1. Protective Function
2. Regulatory Function
3. Developmental Function

Protective Function:
This function focuses on safeguarding investor interests through various activities:

• Prohibiting Insider Trading: SEBI prevents insiders—like directors and employees—from buying or selling securities based on non-public information.

• Checking Price Rigging: The board monitors and prevents artificial fluctuations in security prices that could lead to investor losses.

• Promoting Fair Practices: SEBI enforces fair trading practices and discourages fraudulent activities.

• Financial Education Provider: SEBI conducts sessions to educate investors about market dynamics and money management.

Regulatory Function:
SEBI establishes rules and regulations for financial intermediaries and corporations, which are essential for efficient market management. Key regulatory actions include:

• Setting guidelines and codes of conduct for corporates and financial entities.

• Overseeing company takeover processes.

• Conducting audits and inquiries of stock exchanges.

• Regulating stock brokers and merchant brokers.

Developmental Function:
This function focuses on enhancing investors’ knowledge of trading and market operations:

• Training intermediaries involved in the securities market.

• Promoting electronic trading and internet-based transactions through registered stock brokers.

• Making underwriting optional to reduce issuance costs.

Purpose of SEBI

SEBI was established to create an environment that facilitates the mobilization and allocation of resources. It caters to various groups:

1. Issuers: Provides a marketplace for raising funds.

2. Investors: Ensures protection and offers accurate, regularly maintained information.

3. Intermediaries: Facilitates a competitive market by providing necessary infrastructure.

Structure of SEBI

The SEBI board comprises nine members:

• One Chairman, appointed by the Central Government of India.

• One member appointed by the Reserve Bank of India (RBI).

• Two members from the Union Ministry of Finance.

• Five members elected by the Central Government of India.

In conclusion, understanding SEBI is crucial for anyone interested in the commerce field. Its objectives, functions, and structure play a vital role in maintaining a transparent and efficient securities market. Stay tuned for more insightful articles from Eduacademy!