Full Form of SEBI – Securities and Exchange Board of India

The full form of SEBI is the Securities and Exchange Board of India. It is the market regulator of securities markets in India, formed to establish a facilitating market environment while simultaneously curbing unfair trade practices.

History

Before 1992, the Controller of Capital Issues (CCI)regulated India’s capital market through its powers 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 one could raise it, which was, more often than not, at par value. It resulted in the shares being offered to the public being highly undervalued. While it meant gains for small investors, the companies could not get the right value for their business.

On account of the gradual opening up of the economy,  repealed and replaced the CCI with SEBI by enacting the Securities and Exchange Board of India Act, 1992. SEBI was established as a non-statutory body in 1988 and gave 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 enforcing various regulations to exercise its powers.

SEBI constitutes 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 relating to the securities market.

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Members

The management of SEBI is to vest in the following members:

  • Chairman of the Board.Two members 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.

Structure

The execution of the functions and responsibilities of SEBI are carried out through the concerned departments within SEBI. Its key departments perform the following roles:

Powers and Functions

It has the following powers and functions to enable it to meet the main objects with which it 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 executing 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 violating securities laws.Conducting research related to the securities market to achieve its objectives.Levying fees, penalties, and other charges in its endeavor to enforce discipline in the securities market.

#2 – To Regulate the Activities of Market Intermediaries

And other intermediaries 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 FundsMutual FundsMutual FundsA mutual fund is a professionally managed investment product in which a pool of money from a group of investors is invested across assets such as equities, bonds, etcread moreCollective Investment schemesPromoting 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 other person violating any securities law to the extent of the proceeds involved in the violation.Direct any person not to 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 defined as the act of taking key trading decisions related to a company’s listed stock using critical non-public information. The US Securities and Exchange Commission (SEC) penalizes offenders of illegal insider trading as it causes material loss to the investors. It also shakes their faith in the stock market.
  • read more. 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 that one must disclose in a prospectus or any other document for the issue of capital and other securities, including how to disclose the information.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, concerning, among other things:

  • Issue of capitalTransfer of securitiesMatters to be disclosed by companies issuing securitiesCondition 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 other person connected with the securities market when it has reason to believe that transactions are performed in a manner detrimental to the interest of investors or violation of any of the laws in force.

SEBI can call for the production of books or other documents connected to the violation, inspect the documents, summon persons concerning the issue, and examine witnesses.

Conclusion

SEBI acts as the market regulator for the securities market in India, much like the Securities and Exchange Commission is to the US. With its various powers over issuers, market participants, and investors, SEBI strives to protect the interests of investors by making market practices more regulated, fair, and transparent.

This article guides 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 India’s Securities and Exchange Board. You may refer to the following articles to learn about finance: –

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