Date: 5 January, 2021
by Ambica Sharma, TIPS, Dwarka
The capital market started emerging as a replacement sensation in India at the top of the 1970s. However, with the recognition of stocks, several malpractices also started increasing like price rigging, non-compliance with the provisions of the various Acts, violation of stock exchange rules, delay in delivery of shares and many others.
To reduce these malpractices and regulate the working of the Indian stock exchange SEBI (Securities and Exchange Board of India) was established in 1988.
SEBI’s responsibility is to make sure that the stock exchange in India functions in an orderly manner. It was established to protect the interests of investors and traders within the Indian stock market by providing a healthy environment for securities and to regulate the equity market.
WHAT IS SEBI?
Initially, SEBI acted as a watchdog but lacked the power of monitoring and regulating the affairs of the Indian capital market. Nonetheless, in 1992, it got the statutory status and became an autonomous body to regulate the activities of all the stock exchanges in the country. The statutory status of the SEBI sanctioned it to conduct the consequent activities:-
1. SEBI got the facility of regulating and approving the by-laws of stock exchanges.
2. It could inspect the accounting books of the recognized stock exchanges within the country. It can also call for periodical returns from such stock exchanges.
3. It is authorized to inspect the books and records of financial Intermediaries.
4. It could constrain companies for getting listed on any stock market.
5. To handle the registration of stockbrokers.
SEBI'S MAIN ROLES IN THE INDIAN FINANCIAL MARKET
In order to understand its objectives, SEBI takes care of the three most significant financial market participants.
— Issuer of securities. These are the companies listed within the stock exchange which raise funds through the problem of shares. SEBI ensures that the difficulty of IPOs and FPOs can happen during a transparent and healthy way.
— Players in the capital market i.e. the traders and investors. The capital markets are functioning only for the reason that the traders exist. SEBI is accountable for safeguarding that the investors don’t become victims of any stock market manipulation or fraud.
— Financial Intermediaries. They act as mediators within the stock exchange and make sure that the stock exchange transactions happen smoothly and safely. It monitors the activities of the stock exchange intermediaries.
THE FUNCTIONS OF SEBI
The SEBI carries out the following significant functions to perform its roles.
1. Protective Functions: SEBI performs these functions for protecting the interests of the investors and financial institutions. Protective functions include checking price rigging, prevention of trading, promoting fair practices, creating awareness among investors and prohibition of fraudulent and unfair trade practices.
2. Regulatory Functions: Through regulatory functions, SEBI monitors the functioning of the financial market mediators. It designs the rules and code of conduct for financial intermediaries and regulates mergers, amalgamations, and takeovers takeover of companies.
SEBI also conducts audits and inquiries of stock exchanges. It acts as an administrator for the brokers, sub-brokers, merchant bankers and others. SEBI can levy fees on the capital market contributors. SEBI also regulates the credit rating agencies.
3. Development Functions: Among the list of SEBI’s progressive functions, one of them is imparting training to intermediaries. SEBI promotes fair transactions and reduces malpractices. It also makes investors conscious of the stock market by utilizing the funds available in IEPF.