Ever wondered what keeps India’s $5 trillion stock market ticking smoothly, even as millions of new investors jump in each year? The answer, in large part, is SEBI, the Securities and Exchange Board of India. As India’s financial landscape evolves at breakneck speed, SEBI is the watchdog ensuring transparency and investor protection at every step.
Let’s dive into how SEBI functions and why its role is more crucial than ever in today’s dynamic financial ecosystem.
About Securities and Exchange Board of India
SEBI, the Securities and Exchange Board of India, was established in 1988. It gained legal powers through the SEBI Act of 1992. Headquartered in Mumbai, SEBI operates under the Ministry of Finance and regulates a market that now boasts over 11,000 Foreign Portfolio Investors (FPIs) as of FY24. It aims to promote a healthy financial market in India and regulate the securities market. SEBI oversees different elements of the capital market. These include:
- Functions of listed companies
- Stock exchange
- Brokers
It plays a significant role in the growth of the Indian economy by ensuring a free and fair market. It is headquartered in Mumbai and operates under the Ministry of Finance.
Objectives of SEBI
The objectives of SEBI, as mentioned in their Preamble, are as follows:
- To Protect the Interests of Investors: The organisation ensures that investors receive timely information and are protected from unfair practices.
- To Prevent Insider Trading: SEBI aims to curb insider trading, which involves using non-public information to gain an advantage in trading.
- To Regulate and Develop the Securities Market: SEBI oversees a market where the share of equities and mutual funds in household financial assets is projected to rise from 16% to 23-25% by 2033.
- To Prohibit Fraud or Unfair Trade Practice: SEBI aims to maintain market integrity and protect investors from manipulative techniques.
- To Promote a Code of Conduct and Fair Practice: The regulator enforces ethical standards across over 11,000 listed companies and thousands of intermediaries.
- To Develop a Secondary Market: It aims to create a conducive environment for trading by enhancing liquidity, transparency and efficiency.
Understanding its objective provides insight into the functions of SEBI and its powers.
Ready to take your understanding of finance to the next level? Explore Amity University Online’s industry-focused courses and future-proof your career in the booming Indian financial sector!
Get Complete Details From Expert
Powers of SEBI
SEBI was granted statutory powers through the SEBI Act of 1992. It reports to the Ministry of Finance and exercises three main powers. They are:
Quasi-Judicial Powers
As a regulatory body, it can adjudicate on securities law violations. It has the authority to deliver judgments on matters of fraud and malpractice in the securities market. SEBI promotes accountability and fairness. SEBI can adjudicate on securities law violations, with recent examples including penalties totalling ₹35 lakh for non-genuine trades in illiquid stock options.
Quasi-Legislative
SEBI can form regulations and rules regarding the protection of investors' interests. For example, in 2024, SEBI issued a regulation establishing a regulatory framework for Index Providers in the securities market. The body regularly updates policies to keep pace with India’s rapidly growing fintech and capital markets, which are expected to reach $1.3 trillion in total opportunity by 2025.
In addition, it can make policies that assist in market development and regulations, making SEBI a dynamic organisation.
Also Read:- What Makes an Online MBA in International Finance Unique?
Quasi-Executive
SEBI can inspect records, gather information, and impose penalties, ensuring compliance across a market that has seen retail participation surge by 34% in just one year. They also allow the body to impose penalties and fines to ensure compliance with regulations. Moreover, they can access books of accounts to investigate regulatory violations.
Want to master the intricacies of financial regulation and market dynamics? Check out Amity University Online’s MBA in Financial Management.
Take the next step in your career ?
What Functions does SEBI perform?
SEBI boasts an array of functions for development, regulatory, and protective purposes. These functions ensure that the Indian capital market runs smoothly and is devoid of illegal practices.
Development Functions of the SEBI
The organisation educates and informs investors about trading and market functions. SEBI does everything from training intermediaries involved in the securities market to introducing electronic trading. Furthermore, it conducts research and mutual fund transactions directly through a stockbroker.
Protective Functions of the SEBI
One of the main functions of SEBI is to protect investors' interests. Therefore, they carry out several functions, including prohibiting insider trading. It is a malpractice where a company's employees buy stocks from the secondary market to increase the market value. SEBI's actions to safeguard investors include checking price rigging and promoting fair practices.
Regulatory Functions of the SEBI
SEBI establishes rules and monitors and controls every firm. These include managing company takeovers and share acquisitions. They also inquire about audits, register credit rating agencies, and penalise companies in case of violations.
Final Words
SEBI’s contribution to the Indian financial market marks a milestone. It adapts to the changing dynamics of the securities market and ensures smooth running. The functions of SEBI help it protect investors’ interests while educating intermediaries and setting rules and policies.
Are you looking to study more about the Indian financial market? Our 2-year MBA in Financial Management may be the right choice for you. Get access to global teachers and real-world projects through the best online university in India. And the best part? You can do this from the comfort of your home! Enrol today!
