Page 68 - DMGT401Business Environment

Unit 2: Industrial Policy and Regulatory Structure

2.4 Securities and Exchange Board of India (SEBI) Notes

A major development in the Indian stock market took place in 1988 when Securities and Exchange
Board of India (SEBI) was established through an administrative order, on the lines of the
Securities and Investment Board of the U.K. But it became really powerful in 1992 when CICA
was repealed and the office of Controller of Capital Issues was abolished. The Securities and
Exchange Board Act of 1992 provides for the establishment of a board to protect the interest of
investors and to promote the development and regulation of the securities market. The Board of
SEBI consists of six members comprising the chairman, two members from the amongst the
official of the ministries of the central government dealing with finance and law, two members
who are professional and have expertise or special knowledge relating to securities market, and
one member for the RBI.

SEBI is entrusted with following functions:
1. Regulating the business in stock exchanges and any other securities market
2. Registering and regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, merchant bankers, underwriters, portfolio managers, investment
advisers and such other intermediaries who may be associated with securities market in
any manner
3. Registering and regulating the working of collective investment schemes, including mutual
funds
4. Promoting and regulating self-regulatory organizations
5. Prohibiting fraudulent and unfair trade practices relating to securities market
6. Promoting investors' education and training of intermediaries of securities market
7. Prohibiting insider trading in securities

8. Regulating substantial acquisition of shares and take-overs and mergers of companies
9. Calling for information from, undertaking inspection, conducting inquiries and audits of
the stock exchange and intermediaries and self-regulatory organization in the securities
market
10. Levying fees or other changes for carrying out the above purposes.
SEBI has five operational departments. Besides that it has two more departments – the legal
department and the investigation department. Their scope is as follows:
1. The Primary Market Policy, Intermediaries, Self-Regulatory Organizations (SROs), and
Investor grievances and Guidance Department: It looks after all policy matters and
regulatory issues in respect of primary market, registration, merchant bankers, portfolio
management services, investment advisers, debentures trustees, underwriters, SROs and
investor grievances, guidance, education and association.
2. The Issue Management and Intermediaries Department: It is responsible for vatting of all
prospectuses and letters of offer for public and rights issues, for coordinating with the
primary market policy, for registration, regulation and monitoring of issue-related
intermediaries.
3. The Secondary Market Policy, Operation and Exchange Administration, New Investment
Products and Insider Trading Department: It is responsible for all policy and regulatory
issues of the secondary market and new investment products, registration and monitoring
of members of stock exchanges, administration of some of the stock exchanges, market

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