Hello Guys I will explain what SEBI (Securities and Exchange Board of India) is and what are its roles.
What is SEBI and its role?
SEBI was established in 1988 but got regulatory powers on 12th April 1992. Its key role is regulating securities in Indian market and ensure the stability of the financial markets in India, by attracting foreign investors and protecting Indian Investors.
Reason Behind SEBI
Before SEBI CCI (Controller of capital issue) use to moderate and regulate capital market in India. It was handled by bureaucrats who had very limited knowledge of how the stock market runs. With the growth in dealings of stock markets, lots of malpractices started in stock markets such has price rigging, delay in delivering of shares, unofficial premium on new issue, violation of regulations of stock exchange.
Due to these malpractices customers started losing interest and faith in the stock exchange. So government of india decided to set up SEBI to regulate and maintain rules in stock exchange.
Responsibility of SEBI
The main responsibility of SEBI was to stop malpractices in stock market and protect the interests of investors in securities and promote the development of it.
SEBI has to be responsive to the needs of three groups, which constitute the market:
- Issuers of securities: Issuers can raise finance fairly and easily.
- Investors: Provides accurate and correct information
- Market intermediaries: Provides a competitive professional market.
Objectives of SEBI
- To regulate the activities of stock exchange.
- Protect right of investors and ensuring safety to their investment.
- Avoid Fraudulent and malpractices by having balance between self-regulation of business and its regulation.
- Regulate Code of Conduct for intermediaries such as brokers and underwriters.
- Regulating acquisition of substantial shares by a company. It ensures that no single company by majority of shares, so as to avoid complete control over that company.
Function of SEBI
SEBI functions to achieve their goals and objectives.
- Protecting interest of investors and providing safety.
- SEBI prohibits price rigging (Manipulation of securities prices) practices.
- Prohibits insider trading.
- SEBI also prohibits fraudulent and unfair trade practices.
- Inspecting Books and accounts of financial intermediaries
- Monitor and check share trading and securities market.
- Registration of brokers, underwriters, advisors, merchant bankers and other intermediaries.
- Registration of Mutual fund, stocks, Venture capital funds and Investment Schemes.
- Prohibiting unfair and illegal practices of Market.
- Prohibiting of insider trading through stock watch system.
- Regulating substantial acquisition of Shares.
- Promotion of fair practices in market
- Providing Education and training to intermediaries
- Promotion of self-regulatory organisation
- Publishing informative research useful to all participants.
SEBI plays a major role in Indian stock and securities market. It helps in understanding how our stock market works. For more info visit SEBI.