SEBI

The essentials

The Securities and Exchange Board of India (SEBI) is the regulator of the securities market in India. It was set up in 1988 as a non-statutory body and was given statutory powers through the SEBI Act, 1992. Its headquarters is in Mumbai. SEBI aims to protect investors and to promote the development and regulation of the securities market.

Key points

• Objectives: to regulate stock exchanges and the securities industry to promote their orderly functioning; to protect the rights and interests of investors and guide and educate them; to prevent trading malpractices and achieve a balance between self-regulation by the industry and statutory regulation; and to regulate and develop a code of conduct and fair practices for intermediaries such as brokers and merchant bankers.
• Protective functions: checking price rigging, prohibiting insider trading, prohibiting fraudulent and unfair trade practices, educating investors, and promoting fair practices and a code of conduct in the securities market.
• Developmental functions: training intermediaries of the securities market, conducting research and publishing useful information, and promoting activities of stock exchanges through flexible and adaptable approaches.
• Regulatory functions: framing rules and regulations for intermediaries, registering and regulating brokers, sub-brokers, share transfer agents, merchant bankers and others, registering and regulating mutual funds, regulating takeovers of companies, conducting inquiries and audits of stock exchanges, and levying fees.
• Insider trading means buying or selling securities by people who have access to unpublished, price-sensitive information about a company.

Exam tips

• Classify each function: anything that shields investors from fraud is protective; training and research are developmental; registration and rule-making are regulatory.
• Remember SEBI's three groups of functions as P-D-R.

Common mistakes

• Saying SEBI was set up in 1992. It was set up in 1988 and given statutory status in 1992.
• Classifying registration of brokers as protective. It is regulatory.