Sebi

compiled by Swati Khanna

ESTABLISHMENT OF SEBI

The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.

HISTORY:

The Securities and Exchange Board of India was established by the government of India on 12  April 1988 as an interim administrative body to  promote orderly and healthy growth of the securities market and for investor protection.

It was to function under the overall  administrative control of the Ministry of Finance of the GOI.

Definition of Securities

Securities and Exchange Board Of India Securities : Investment in a company or in government debt, which can be traded on the financial markets and which produces an income for the investor. Securities include government bonds which pay interest and company shares which pay dividends

Reason for the establishment of SEBI The capital market had witnessed a

tremendous  growth during the 1980·s characterized by the increasing participation of the public.

This ever expanding investor population and market capitalization led to a variety of malpractices on the  part of companies, brokers, merchant bankers, investment consultants and others involved in the securities market.

Continued….. The glaring examples of these malpractices

include existence of self styled merchant bankers, unofficial   private placements, rigging of prices, unofficial   premium on new issues, non adherence of provisions of The Companies Act , violation of rules and  regulations of stock exchanges and listing requirements, delay in delivering shares etc.

These malpractices and unfair trade practices have eroded investor confidence and multiplied investor  grievances 

Continued…..

The government and the stock exchanges were rather helpless in redressing the investors problems because of lack of proper penal provisions in the existing legislation.

Therefore the GOI decided to set up SEBI a separate regulatory body

Securities and Exchange Board of India The SEBI was constituted in 1988 by a resolution of

GOI and it was made a statutory body by the Securities and and Exchange Board of India Act, 1992.

The Act empowers the Central Government to supersede SEBI if on account of emergency, SEBI is unable to perform the functions and duties under any provision of the ACT.

Objective:

To protect the interests of investors in securities and to promote the development of and to regulate the securities market for matters connected therewith.

Powers and Functions: Regulates the business in stock exchanges and any

other securities market. Registering and regulating the working of stock

brokers. Registering and regulating the working of collective

investment schemes Promoting and regulating self regulatory

organizations Prohibiting fraudulent and unfair trade practices in

securities market Promoting investor education and training of

intermediaries in securities market Prohibiting insider trading in securities. Regulating substantial acquisition of shares and

take-over by companies Conducting inspection and inquiries Levying fees or other charges Conducting research

Salient features of the SEBI ACT 1992

Shall be a body corporate with perpetual succession an common seal with power to acquire hold and dispose off property

HO will be in Mumbai may establish offices at other places in India

Chairman and members of board are appointed by the central government

Government can prescribe terms of office and other conditions of service of the board and chairman

Primary duty of the board to protect the interest of the investors Amendments

Can undertake inspection of any books

Issue commissions for the examination of witness of documents

Sweeping powers to suspend trading of any security in a recognized stock exchange Power to regulate or prohibit issues of prospectus Power to prohibit manipulative and deceptive devices Penalties levied under the act have been enhanced

PREAMBLE

The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as

"...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"

SEBI

The Securities and Exchange Board Of India (SEBI) is the regulator for the securities market in India. It was formed officially by the government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament.

Mission of SEBI

Securities & Exchange Board of India (SEBI) formed under the SEBI Act, 1992 with the prime objective of Protecting the interests of investors in securities,

Promoting the development of, and

Regulating, the securities market and for matters connected therewith or incidental thereto.’

NOTE:

Focus being the greater investor protection, SEBI has become a

vigilant watchdog

Important role Of SEBI

Power of the board to order investigation

Power of investigating authority

Prohibition to dealing in certain securities

Prohibition of unfair trade practice, fraudulence

Duty to Co-operate

Function of SEBI

SEBI is expected to regulate the business in stock exchanges and any other securities market.

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Registering and regulating the working of collective investment schemes, including mutual funds is a responsibility of SEBI.

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SEBI is responsible for prohibiting fraudulent and unfair trade practices relating to securities markets.

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Prohibiting insider trading in securities, with the imposition of monetary penalties, on erring market intermediaries.

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Regulating substantial acquisition of shares and takeover of companies.

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Registration & regulation of the working of intermediaries.

Primary Market Secondary Market

Stock- Brokers

Underwriters

Merchant Bankers

Sub- Brokers

Portfolio Managers

Organization Structure

The activities of SEBI have been divided into 5 operational departments.

Each department is headed by an Executive Director 

apart from its head office at Mumbai SEBI has regional offices in Kolkata, Chennai, Delhi to attend  to investor complaints and liaise with the issuers, intermediaries and stock exchanges in the concerned  region. 

Continued…..

SEBI has formed 2 advisory committees-

Primary market advisory committee 

Secondary market advisory committee 

These committees are non statutory in nature and SEBI is not bound by the advice of the committees. These committees are a part of SEBIs constant endeavour to obtain feedback from the market players on issues relating to the regulations and development of the market. 

Power: SEBI has the right to search and

seizure where just cause can be given. In matters of security trading, SEBI has the power to restrict and allow trading in a given scrip without any external (i.e. judicial or executive) intervention.

Mutual funds cannot invest more than 10 per cent of  the total net assets of a scheme in the short-term deposits of a single bank, said the Securities and  Exchange Board of India.

Announcing guidelines for parking of funds in short-term deposits of scheduled commercial banks (SCBs) by mutual   funds, the regulator said that investment cap would also take into account the deposit schemes of the bank's subsidiaries.

The SEBI has also defined 'short term' for funds' investment purposes as a period not exceeding 91 days.

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