Updated Jan 29, 2022

What Does SEBI do?

What does SEBI do?

As India is a billion-dollar economy, its capital markets are also quite massive as numerous investors park their funds in companies listed in stock markets. For the protection of such investors and smooth functioning of capital markets, there need to be certain regulations and a regulatory body to govern these institutions. That is where SEBI makes a difference. Briefly known as 'Securities and Exchange Board of India', it keeps an eye on every matter and regulation related to stock markets, including National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). It constantly attempts in protecting the retail investor's interest along with enforcing and amending necessary rules and regulations timely.

History of SEBI

SEBI was established on 12th April 1988 as a non-statutory body and was given statutory powers on 30th January 1992 through the SEBI Act, 1992. It functions as the autonomous and regulatory body for the Indian capital and commodities market, under the ownership and guidance of the Ministry of Finance, Government of India.

Before SEBI, capital markets were regulated by CCI, briefly known as Controller of Capital Issues, which derived its powers from the Capital Issues (Control) Act, 1947.

SEBI headquarters are located at Bandra Kurla Complex in Mumbai, Maharashtra. For seamless functioning, it also has regional offices in the Southern region at Chennai, Northern region at New Delhi, Eastern region at Kolkata and Western region at Ahmedabad.

Functions of SEBI

• Investor's Interest Protection:

One of the topmost priority functions of SEBI is to protect the interests of several retail investors and other financial participants of the market. It helps them by reducing the risk of volatility and prohibiting unfair market practices. Other than this, SEBI works in the field of promoting fair values of stocks, detecting and prohibiting insider trading and making trading of shares easy and convenient for the investors.

• Regulates intermediaries:

For executing a trade, there are numerous intermediaries such as brokers, sub-brokers, investment bankers, securities agents, investment advisors, share transfer agents, bankers, merchant bankers, underwriters, registrars and other related persons. SEBI provides them with a platform to collaborate and regulate their work. Other than this, it keeps an eye on the operations and business moves of such intermediary organizations as well.

• Educates Investors:

As investors are the main participants in the market, SEBI conducts several awareness and education programmes to keep these investors up to date with the market conditions and latest trends. For investors' wellbeing, it also educates them regarding the intermediaries mentioned above about how to approach them regarding any inconvenience. In a way, SEBI knows that investors are the priority for a healthy economy and works in the direction of their welfare and development.

• Regulatory Functions:

On the other hand, SEBI performs regulatory functions for the companies listed on the respective stock exchanges and monitors their business activities, including:

• Determining guidelines for raising funds
• Conducting audits of corporates
• Answering queries regarding compliances
• Supervises and registers several credit rating agencies
• Collects fees and fines for misconduct

• Prohibits Insider Trading:

Insider trading stands for the trading of shares based upon the nonpublic and illegal information of the business affairs of the companies that may result in harsh consequences for other market participants. As portfolio investors manage huge funds, they tend to perform such malpractices, which might be a disaster for retail and small investors. To prohibit such activities, SEBI keeps an eye on each and every transaction and its consequences to support retail investors.

Power of SEBI

SEBI possesses several powers that are aimed at transparent and seamless business trading activities:

• Giving approvals for any law or regulation relating to the functions of the stock exchange or anything related.
• Periodical assessments of books of any stock exchange or any company listed thereby on demand.
• It can delist any company from the stock exchange upon several fraud cases of complaints against its behaviour.
• SEBI can also check the accounts and access the records of all its intermediaries and brokers anytime.
• One of the most crucial powers of SEBI is to deliver a judgment regarding any malpractices occurring in the market.

Conclusion

As an investor, it's very important to know the functions, powers and history of SEBI, an institution that regulates the capital markets of the country. Hopefully, this article can guide you in understanding the same in detail. However, before starting your investment journey, ensure to learn about other regulatory bodies and intermediaries in detail as well.