THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

Presented By: Sakshi Damwani

Enrolment No. 18254321042
MBA-FS (SEM-III)
ESTABLISHMENT

In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government
of India through an executive resolution and was subsequently upgraded as a fully autonomous
body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board
of India Act (SEBI Act) on 30th January 1992.
REASON FOR THE ESTABLISHMENT OF SEBI

 The capital market had witnessed a tremendous growth during the 1980s.

This ever expanding investor population and market capitalization led to a variety of
malpractices.

These malpractices include rigging of prices, unofficial premium on new issues, violation of
rules and regulations, delay in delivery of shares etc.

So, the government of India decided to set-up a separate regulatory body known as SEBI.
SEBI HEADQUARTER MUMBAI
OBJECTIVES OF SEBI

The overall objective of SEBI are to protect the interest of investors and to promote the
development of stock exchange and to regulate the activities of stock market. The objectives of
SEBI are:

To regulate the activities of stock exchange.

To protect the right of investors and ensuring safety to their investment.
Management of the SEBI Under the SEBI Act, 1992
The Board shall consist of the following members, namely ;-

a) A Chairman

b) Two members from amongst the officials of the ministers of the central government dealing with
finance and law

c) One member from amongst the officials of the RBI constituted under section 3 of the RBI Act 1934

d) Two other members to be appointed by the central government, who shall be professionals and,
inter alia, have experience or special knowledge relating to the securities market.
POWERS OF SEBI

Power to call periodical returns from recognized stock exchanges.

Power to compel listing of securities by public companies.

Power to levy fees and other charges for carrying out the purposes of regulation.

Power to call information or explanation from recognized stock exchanges or their members.

Power to grant approval to bye- laws of recognized stock exchanges.

POWER OF SEBI CONT..

Power to control and regulate stock exchanges.

Power to direct inquiries to be made in relation to affairs of stock exchanges or their members.

Power to make or amend bye-laws of recognized stock exchanges.

Power to grant registration to market intermediaries.

Power to declare applicability of Section 17 of the Securities Contract (Regulation) Act 1956, in
any State or area, to grant licenses to dealers in securities.
FUNCTIONS OF SEBI
The SEBI with its powers, can carry out the following functions.

Ask any intermediary or market participation for information.

Inspect books of depository participants, issuers or beneficiary owners.

Suspend or cancel a certificate of registration granted to a depository participant or issuer.

Request the RBI to inspect books of a banker to an issue and suspend or cancel the registration
of the banker to an issue.

Suspend or cancel certification issued to the custodian of securities.

FUNCTIONS OF SEBI CONT..

Suspend or cancel registration issued to foreign institutional investors.

Investigate or inspect books of accounts and records of insiders.

Investigate an acquirer, a seller, or merchant banker for violating takeover rules.

Suspend or cancel he registration of a merchant banker.

Investigate the affairs of mutual funds, their trustees and asset management companies.
FUNCTIONS OF SEBI CONT..

Investigate any person dealing in securities on complaint of contravention of trading regulation.

Suspend or cancel the registration of errant portfolio managers.

Cancel the certification of registrars and share transfer agents.

Cancel the certification of brokers who fail to furnish information of transactions in securities or
who furnish false information.
Regulations, Guidelines, and Schemes Issued by the SEBI

Regulations

•SEBI (Stock Brokers and Sub Brokers) Regulations, 1992

•SEBI (Prohibition of Insider Trading) Regulations, 1992

•SEBI (Merchant Bankers) Regulations, 1992

•SEBI (Portfolio Managers) Regulations, 1993

•SEBI ( Registrars to an Issue and Share Transfer Agents) Regulations, 1993

•SEBI (Underwriters) Regulations, 1993

•SEBI ( Debenture Trustees) Regulations, 1993

•SEBI ( Bankers to an Issue) Regulations, 1994

•SEBI ( Foreign Institutional Investors) Regulations, 1995

•SEBI ( Custodian of Securities) Regulations, 1996

•SEBI ( Depositories and Participants) Regulations, 1996

•SEBI (Venture Capital Funds) Regulations, 1996

•SEBI (Mutual Funds) Regulations, 1996

•SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,1997

•SEBI (Buyback of Securities) Regulations, 1998

•SEBI (Credit Rating Agencies) Regulations,1999

•SEBI ( Collective Investment Schemes) Regulation, 1999

•SEBI (Foreign Venture Capital Investors) Regulations,2000

•SEBI (Procedure for Board Meeting) Regulations, 2001

•SEBI (Issue of Sweat Equity) Regulations, 2002

•SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations,
2002
With a view to making markets more competitive and complaint, the SEBI brought in the
following new regulations:

•SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 2003

•SEBI (Ombudsman) Regulations, 2003

•SEBI (Central Listing Authority) Regulations, 2003

•SEBI (Central Database for Market Participants) Regulations,2003

•SEBI (Self Regulatory Organisations) Regulations, 2004

•SEBI (Criteria for Fit and Proper Person) Regulations, 2004

Guidelines

•SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999

•SEBI (Disclosure and Investor Protection) Guidelines, 2000

•SEBI (Delisting of Securities) Guidelies,2003

Schemes

•Securities Lending Schemes, 1997

•SEBI (Informal Guidance) Scheme, 2003

Regulation of the Securities Market

The SEBI registers and regulates the intermediaries in the primary market. Some of the major
intermediaries it regulates are:

•Merchant Bankers

•Underwriters

•Bankers to an Issue

•Registrars to an Issue

•Share Transfer Agents

The SEBI registers and regulates various intermediaries in the secondary market.

•Brokers

•Sub-Brokers

•Stock Exchanges

•Foreign Institutional Investors (FIIs)

•Custodians

•Depositories

•Mutual Funds
ROLE OF SEBI IN MUTUAL FUNDS

SEBI notified regulations for mutual funds in 1993.

SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of
investors.

All mutual funds whether promoted by private sector or public sector are governed by SEBI.

SEBI has made it mandatory for mutual funds to pay interest @15% p.a for delays in the
dispatch of repurchase/redemption proceeds to the unit holders. Because of such action, the
interest amount paid by mutual funds has declined.
Self Regulatory Organisations (SROs)

The SEBI has framed the SEBI (Self Regulatory Organisations) Regulation, 2004, which obligate
SROs to undertake the following.

•Always abide by the directions of the SEBI.

•Be responsible for investor protection and education of investors or its members and shall ensure
observance of securities laws by its members.

•Specify standard of conduct for its members and also shall be responsible for the implementation
of the same by its members.

•Conduct inspection and audit of its members on a regular basis, through independent auditors.
•Submit its annual report to the SEBI.

•Treat all its members and the applications for membership in a fair and transparent manner.

•Collect admission and membership fees for its members for carrying out the purposes of the
regulations.

•Promptly inform the SEBI for violations of the provisions of the act, the rules, the regulations, the
directions, the circulars or the guidelines by any of its members.

•Conduct screening and certification tests for its members, agents and such other persons as it may
determine.
•Conduct training programmes for its members or agents and also conduct awareness programmes
for securities market investors.

•Make endeavor for introduction of best business practices among its members.

•Act in utmost good faith and shall avoid conflict of interest in the conduct of its functions.

•Comply with the norms of corporate governance as applicable to listed companies.

•Discharge such other functions and obligations as may be specified by the SEBI, from time to
time.
 Investor Protection Measures
•Investor protection legislation is implemented under the Section 11(2) of the SEBI Act. The
measures are as follows:

•Stock Exchange and other securities market business regulation.

•Registering and regulating the intermediaries of the business like brokers, transfer agents,
bankers, trustees, registrars, portfolio managers, investment consultants, merchant bankers, etc.

• Recording and monitoring the work of custodians, depositors, participants, foreign investors,
credit rating agencies, etc.

•Registering investment schemes like Mutual fund & venture capital funds, and regulating them.
•Promotion and controlling of self-regulatory companies.

• Keeping a check on frauds and unfair trading methods related to the securities market.

•Observing and regulating major transactions and take-over of the companies.

•Carry out investor awareness and education programme.

• Train the intermediaries of the business.

• Inspecting and auditing the security exchanges (SEs) and intermediaries.

• Assessment of fees and other charges.

Investors’ Education

Some of the steps taken by the SEBI for educating investors during the year 2000-01 were as
under:

•The SEBI distributed the booklet titled A Quick Reference Guide for Investors to the Investors.

•The SEBI wrote to the stock exchanges and various corporates to distribute the booklet titled A
Quick Reference Guide for Investors to their shareholders/investors.

•The SEBI also issued a series of advertisements/public notices I national as well as regional
newspapers to educate and caution the investors about the risk associated with the investments in
collective investment schemes.
•The SEBI also broadcasts messages for investors in the collective investment schemes through
the national hook-up and regional stations of Vividh Bharati.

•The SEBI issued messages in the interest of investors o the national channel and regional stations
on Doordarshan.
Investors’ Grievances

Investor grievance are usually due to delay in dispatch of allotment letters, refund orders,
misleading statements in advertisements or in the prospectus, delay in transfer of securities, non-
payment of interest or dividend.

These grievance are dealt with either SEBI or department of company affairs.
OMBUDSMAN

SEBI issued ombudsman regulation in 2003 to provide fair and transparent system of redressal
of grievance.

These regulation empower an investor to get redressal against both the company and the
intermediaries.

Complaints dealt by ombudsman are:

•Delays in receiving fund orders, allotment letters, dividend or interest.

•Non-receipt of dividend, certificates, bonus shares, annual reports, refunds in allotment or

redemption of mutual fund unit.
•Non-receipt of letter of offers in respect of buy-back of shares or in case of delisting.

•Complaints and grievance against intermediaries or listed companies.

CONCLUSION

Today SEBI has become the authorisation body to form the rules and regulations for the stock
markets in both capital and money market due the emergence of SEBI the number of unethical
practices in share market has been reduced proportionately. It shows the active participation of the
exchange board in order to control and regulate the trading activities.

It is suggested that more power to be handled to SEBI from the union government in order to
mitigate the unethical practices like insider trading and stock market frauds are to be identified
and protect the interest of the individual as well as institution investor.