SEBI stands for Securities and Exchange Board of India. It is a statutory regulatory body that was established by the Government of India in 1992 for protecting the interests of investors investing in securities along with regulating the securities market. SEBI also regulates how the stock market and mutual funds function.
Objectives of SEBI
Investor Protection: This is one of the most important objectives of setting up SEBI. It involves protecting the interests of investors by providing guidance and ensuring that the investment done is safe.
Preventing the fraudulent practices and malpractices which are related to trading and regulation of the activities of the stock exchange
To develop a code of conduct for the financial intermediaries such as underwriters, brokers, etc. To maintain a balance between statutory regulations and self regulation.
Function Of SEBI
SEBI has the following functions
1. Protective Function
2. Regulatory Function
3. Development Function
Protective Function
Prohibits insider trading: The buying or selling of securities by individuals who have access to non-public information about a company. These insiders can include directors, employees, and promoters of the company. In order to prevent such unfair trading practices, the Securities and Exchange Board of India (SEBI) has prohibited companies from purchasing their own shares from the secondary market. This measure aims to ensure a level playing field for all investors and maintain market integrity.
Check price rigging: Price rigging is the manipulation of securities’ prices to create artificial and abnormal price movements. This can involve intentionally increasing or decreasing the market price of stocks, leading to unexpected losses for investors. SEBI maintains strict watch in order to prevent such malpractices.
Promoting fair practices: SEBI promotes fair trade practice and works towards prohibiting fraudulent activities related to trading of securities.
Financial education provider: SEBI educates the investors by conducting online and offline sessions that provide information related to market insights and also on money management.
Regulatory Function
SEBI has defined the rules and regulations and formed guidelines and code of conduct that should be followed by the corporates as well as the financial intermediaries.
Regulating the process of taking over of a company.
Conducting inquiries and audit of stock exchanges.
Regulates the working of stock brokers, merchant brokers.
Development Function
Developmental function refers to the steps taken by SEBI in order to provide the investors with a knowledge of the trading and market function. SEBI focuses on training individuals and entities involved in the securities market to ensure their knowledge and understanding of market regulations and best practices.
Purpose of SEBI
SEBI (Securities and Exchange Board of India) was established with the purpose of facilitating resource mobilization and allocation by creating an enabling environment. It plays a crucial role in meeting the evolving demands of various stakeholders. Here’s how SEBI caters to the needs of different groups:
Issuers: SEBI offers a conducive marketplace where issuers can raise funds for their ventures. This ensures a streamlined and regulated process for capital mobilization.
Investors: SEBI prioritizes investor protection by ensuring a steady supply of accurate and up-to-date information. This fosters transparency and confidence in the market, safeguarding investors’ interests.
Intermediaries: SEBI’s initiatives create a competitive market for intermediaries, such as brokers, investment advisors, and merchant bankers. By establishing and maintaining proper infrastructure, SEBI enhances the efficiency and effectiveness of intermediaries’ operations.
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