Full Form of SEBI – Securities and Exchange Board of India
The full form of SEBI is the Securities and Exchange Board of India is the market regulator of securities markets in India and was formed with a view to establishing a facilitating market environment while at the same time curbing unfair trade practices.
Prior to 1992, India’s capital market was regulated by the Controller of Capital Issue (CCI) through the powers delegated to it under the Capital Issues Control Act, 1947. The Act gave the Central Government the power to dictate the amount of capital a company could raise and the price at which it could be raised, which was more often than not, at par value. This resulted in the shares being offered to the public being highly undervalued. While it meant gains for small investors, it also meant the companies could not get the right value for their business.
On account of the gradual opening up of the economy, the CCI was repealed and replaced by SEBI by way of enactment of the Securities and Exchange Board of India Act, 1992. SEBI was established as a non-statutory body in 1988 and was given the power to become the statutory and apex regulatory authority for securities markets through the SEBI Act, 1992. SEBI has encouraged appropriate pricing of capital issues and securities by way of enforcement of various regulations in exercise of its powers.
SEBI was constituted with the following key objectives:
- To be the regulating agency for the securities market and promote the development of the same.
- Regulate the activities of market intermediaries.
- To protect the interests of investors.
- Oversee and administer regulations and other enactments related to the securities market.
The management of SEBI is to vest in the following members:
- Chairman of the Board.
- Two members who are officials from the Ministry of Central Government that deals with Finance and the Companies Act administration.
- One member is an official of the Reserve Bank of India.
- Five other members appointed by the Central Government – at least three of them should be appointed as whole-time members.
The execution of the functions and responsibilities of SEBI are carried out through the concerned departments within SEBI. The following are the roles performed by its key departments.
|Commodity Derivatives Market Regulation Department.||Supervising the functioning and operations of Commodity Derivatives exchanges.|
|Corporate Finance Department||• Issuance and listing of securities|
• Merger/ demerger, amalgamation, reduction in capital.
• Corporate governance and accounting/auditing standards.
• Corporate restructuring through Takeovers/ buybacks.
• Delisting, etc.
|Department of Economic and Policy Analysis||• Policy analysis|
• Regulatory research
• Statistics and Publication
• Commodity research
|Department of Debt and Hybrid Securities||Matters related to corporate bonds, listed debt securities, Real Estate Investment Trust, Infrastructure Investment Trust.|
|Enforcement Department – 1||Enforce legal proceedings and action against market irregularities.|
|Enforcement Department – 2||Handles appeals against SEBI orders filed in other courts of law and tribunals.|
|Inquiries and Adjudication Department||Handles hearings and adjudication brought on by other departments of SEBI against market violators who are within SEBI’s purview.|
|Recovery and Refund Department||Initiates and handles recovery proceedings against market violators who were directed to pay fees/penalties/refund to investors and have failed to do so.|
|Division of Foreign Portfolio Investors & Custodians.||Monitoring and regulating activities of Foreign Portfolio Investors and Custodians.|
|Integrated Surveillance Department.||Market surveillance of all segments of the securities market.|
|Investigations Department||Conducts examination and investigation of all types of violations related to the securities market.|
|Investment Management Department||Registers and regulates mutual funds, venture capital funds, foreign venture capital investors, Foreign Institutional Investors, Portfolio Managers, custodians, etc.|
|Market Intermediaries Regulation & Supervision Department.||Registration and monitoring of all market intermediaries like stockbrokers, credit rating agencies, debenture trustees, etc.|
|Market Regulation Department||Formulation of policies and supervision of stock exchanges, depositories, clearing corporations, etc.|
|Office of International Affairs||Engages with foreign regulators and law enforcement agencies to promote international cooperation as regards regulations and enforcement.|
|Office of Investor Assistance and Education.||Handles investor complaints.|
Powers and Functions
It has the following powers and functions to enable it to meet the main objects with which it was formed:
#1 – To Develop and Regulate the Securities Market
- Regulating stock exchanges and any other securities markets. In doing so, SEBI would also be involved in the execution of the powers and functions delegated to it under the Securities Contracts Regulation Act, 1956.
- Regulating instances of substantial acquisition of shares and take-over of companies.
- Specify and detail the various requirements for listing and transfer of securities.
- Undertaking inspection, inquiry, and audit of stock exchanges and others connected with securities markets.
- Calling for information from banks or any other body involved in transactions under investigative scrutiny by SEBI.
- Calling for information in India or outside India prevents or detects instances of violation of securities laws.
- Conducting research related to the securities market for the purpose of achieving its objects.
- Levying of fees, penalties, and other charges in its endeavor to enforce discipline in the securities market.
#2 – To Regulate the Activities of Market Intermediaries
- SEBI has the power to register and regulate the working of the following market intermediaries.
- Share transfer agents
- Bankers to an issue
- Trustees of trust deeds in relation to securities
- Registrars to an issue
- Merchant bankers
- UnderwritersUnderwritersThe underwriters take the financial risk of their client in return of a financial fee. Market Makers like financial institution and large banks ensure that there is enough amount of liquidity in the market by ensuring that enough trading volume is there.
- Portfolio managersPortfolio ManagersA Portfolio Manager is an executive responsible for making investment decisions & handle investment portfolios for fulfilling the client’s investment-related objectives. Also, he/she works towards maximizing the benefits & minimizing the potential risks for clients.
- Investment advisers
- Custodians of securities
- Foreign Institutional Investors
- Credit Rating Agencies
And such other intermediaries who may be associated with the securities market in any manner.
SEBI also governs the registration of and regulates the working of alternate investment venues such as
- Venture Capital Funds
- Mutual FundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.
- Collective Investment schemes
- Promoting and regulating other self-regulatory organizations in connection with the securities market.
#3 – Protection of Interests of Investors/securities Market
To protect the interest of investors, SEBI has the power to take the following measures:
- Suspend the trading of any security
- Restrain and prohibit any person from accessing the securities market to buy or sell securities
- Suspend any official of any stock exchange or any other self-regulatory organization
- Retain the proceeds or securities in respect of any transaction under investigation
- Attach the bank account of any intermediary or any other person involved in a violation of any securities law to the extent of the proceeds involved in the violation
- Direct any person to not dispose of the security or other asset involved in the transaction under investigation
- Prohibit insider trading in securities. In the case of instances of insider tradingInsider TradingInsider trading is buying or selling the stocks of publicly traded companies based on confidential information acquired from direct or indirect sources, which will influence the security prices. It is stated as an illegal practice in many countries., SEBI has the power to inspect books or documents connected to the issue and take measures such as those specified in the points above
- Specify matters to be disclosed in a prospectus or any other document for the issue of capital and other securities, including the manner in which the information is to be disclosed
- Prohibit any company from issuing a Prospectus or Offer Document or advertisement soliciting money for the issue of securities
#4- To Oversee and Administer Regulations and Other Enactments Related to the Securities Market
Securities and Exchange Board of India can make regulations by notification, with the prior approval of the Central Government, in relation to, among other things:
- Issue of capital
- Transfer of securities
- Matters to be disclosed by companies issuing securities
- Condition for grant of certificate of registration of intermediaries and market participants regulated by it, fees to be paid, manner of suspension or cancellation of the certificate.
#5 – Powers of Investigation
Securities and Exchange Board of India can appoint any Investigating Authority to investigate any intermediary or any other person connected with the securities market when it has reason to believe that transactions are being carried out in a manner detrimental to the interest of investors or in violation of any of the laws in force.
SEBI can call for the production of books or such other documents connected to the violation, inspect the documents, summon persons in relation to the issue, and examine witnesses.
SEBI acts as the market regulator for the securities market in India, much like the Securities and Exchange Commission is to the US. By the various powers it has over issuers, market participants, and investors, SEBI strives to protect the interests of investors by making market practices more regulated, fair, and transparent.
This has been a guide to the full form of SEBI (Securities and Exchange Board of India) and its definition. Here we learn the members and structures of SEBI, powers, and functions of the Securities and Exchange Board of India. You may refer to the following articles to learn more about finance –