For every investor who wants to invest money but fears financial frauds, there is an authority called SEBI whose object is to protect their interests. People often ask – What is SEBI and its work? So here, we are discussing SEBI as an institution, its powers and functions, and the governing law behind it.
SEBI Full Form
SEBI stands for Securities and Exchange Board of India. It is the apex regulatory body overseeing the Indian capital and securities markets. Securities in SEBI are financial instruments like shares, stocks, bonds, debentures, and derivatives, issued by companies or governments to raise capital, representing ownership or debt, traded in markets for investment, and regulated by SEBI to protect investors and develop the market. Exchange in SEBI (like BSE or NSE) is a regulated marketplace where financial instruments (stocks, bonds, derivatives) are bought and sold, acting as platforms for listing, trading, and clearing securities, all under SEBI’s overarching rule-making and supervisory authority to ensure fair and orderly markets for investors.
SEBI as an Authority
- When SEBI was established – The Securities and Exchange Board of India was constituted as a non-statutory body on April 12, 1988 through a resolution of the Government of India. Later, SEBI was established as a statutory body in the year 1992. The provisions of the SEBI Act, 1992 came into force on January 30, 1992.
- SEBI Headquarters – The Head Office of SEBI is in Mumbai, Maharashtra. SEBI Northern Regional Office is in New Delhi, Southern Regional Office in Tamil Nadu, Western Regional Office in Gujarat, Eastern Regional Office in West Bengal, and Indore Local Office in Madhya Pradesh.
- SEBI Chairman – Sh. Tuhin Kanta Pandey
- SEBI Members – Right now, there are three whole-time members of SEBI. Mr. Amarjeet Singh, Mr. Kamlesh Chandra Varshney and Mr. Sandip Pradhan are serving as whole-time SEBI members. There are three part-time members of the Securities and Exchange Board of India. These include Ms. Deepti Gaur Mukerjee, Ms. Anuradha Thakur and Mr. Shirish Chandra Murmu.
SEBI Act
The Securities and Exchange Board of India Act, 1992 was enacted for the establishment of a Board to protect the interests of investors in securities. This further aims to promote the development of, and to regulate, the securities market. The SEBI Act contains 35 sections and a schedule. Various SEBI Rules and Regulations are issued from time to time to address the specific needs of the hour.
The SEBI Act empowers the Securities and Exchange Board of India to regulate India’s securities market to protect investors, while ensuring fair and efficient market functioning. Regarding the scope of Securities and Exchange Board of India, it covers stock exchanges, intermediaries (brokers, merchant bankers, mutual funds, etc.), and listed companies. Penalties under SEBI Act are monetary or regulatory, not imprisonment.
Functions of SEBI
Here is a broad idea of what SEBI does:
- Regulatory: Frame rules, register and regulate market intermediaries.
- Protective: Prevent fraud, insider trading, and unfair trade practices.
- Developmental: Promote orderly growth of the securities market.
- Investigative & Enforcement: Conduct inspections, investigations, impose penalties, suspend/cancel registrations.
- Authority: SEBI can issue directions, conduct search & seizure, and adjudicate violations.
- Impact: Ensures transparency, fairness, and investor confidence in Indian capital markets.
Going into depths of SEBI functions, let us understand the powers and functions from specific roles:
1. Protective Functions
- Protects the interests of investors
- Prevents frauds and malpractices in the securities market
- Prohibits insider trading
- Checks price rigging and unfair trade practices
- Promotes investor education and awareness
2. Regulatory Functions
- Registers and regulates stock brokers, sub-brokers, merchant bankers, mutual funds, etc.
- Regulates stock exchanges and depositories
- Frames rules, regulations, and guidelines for the securities market
- Regulates takeover and acquisition of companies
- Oversees issue of shares, debentures, and other securities
3. Developmental Functions
- Promotes fair practices and code of conduct in the market
- Encourages self-regulatory organizations (SROs)
- Develops and regulates new financial instruments
- Promotes training and professionalism of market intermediaries
4. Investigative & Enforcement Functions
- Conducts inspections, inquiries, and audits
- Can call for information and records
- Has power to impose penalties and issue directions
- Can suspend or cancel registration of intermediaries
SEBI as an Adjudicating Authority
As an adjudicating authority, SEBI exercises quasi-judicial powers to inquire into securities law violations and impose penalties in a fair, transparent, and legally structured manner. SEBI does not act as a criminal court and proceedings are civil in nature, focusing upon regulatory compliance.
SEBI adjudicates violations relating to:
- Insider trading
- Fraudulent and unfair trade practices
- Non-disclosure of shareholding
- Failure to furnish information or returns
- Violation of takeover regulations
- Breach of listing obligations
- Summon and examine persons on oath.
- Call for documents and records.
- Consider aggravating and mitigating factors before imposing penalties.
Aggrieved parties can appeal against SEBI’s adjudication orders before the Securities Appellate Tribunal (SAT) under Section 15T. Further appeal lies to the Supreme Court of India on questions of law.
Two Words on SEBI
In conclusion, SEBI plays a pivotal role as an adjudicating authority by exercising autonomous and quasi-judicial roles to ensure effective enforcement of securities laws in India. Through a structured adjudication process grounded in statutory provisions and principles of natural justice, SEBI ensures accountability, deters market misconduct. SEBI upholds investor confidence, while its ability to impose proportionate penalties and pass reasoned orders contributes to maintaining transparency and fairness. SEBI induces discipline in the securities market, thereby reinforcing the integrity of India’s capital market framework.
