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Unit 14: Securities and Exchange Board of India

14.1 Securities and Exchange Board of India (SEBI) Notes

Both the UK and the USA had long ago created separate boards for the regulation of the
securities market. The US has the Securities and Investment Board (SIB) and the Securities and
Exchange Commission (SEC). The Indian government’s intention to set up a separate board for

the regulation and orderly functioning of the market was first declared in the Budget Speech by
Rajiv Gandhi, the then Prime Minister and the Minister of Finance, who, while presenting the
Budget for the year 1987-88 stated:
“The capital markets in India have exceed ` 5,000 crores in 1986-87. They were only about

` (figure not given) crores in 1980-81. For a healthy growth of capital markets, investors must be
fully protected. Trading malpractice must be prevented. The government has decided to set up
a separate board for the regulation and orderly function of stock exchanges and the securities
industry.”

Origin

By a Notification issued on April 1, 1988, the Securities and Exchange Board of India (SEBI),
was constituted as an interim administrative body to function under the overall administrative
control of the Ministry of Finance of the Central Government.
In July 1988, the SEBI, constituted as aforesaid, published an approach paper on comprehensive
legal for securities market.

The SEBI was given a statutory status on 30th January, 1992 by an Ordinance to provide for
the establishment of SEBI. A Bill to replace the Ordinance was introduced in Parliament on 3rd
March, 1992 and was passed by the President’s assent. However, as provided for in Section 1(3),
this Act is to be deemed to have come into on 30th January, 1992 i.e. the date on which the SEBI
Ordinance was promulgated.

14.2 Powers and Functions of SEBI

Chapter IV of SEBI Act, 1992, deals with the powers and functions of the Board. Section 11 of
the Act lays down that it shall be the duty of the Board to protect the interests of the investors
in securities and to promote the development of, and to regulate the securities markets by such
measures as it thinks fit. These measures would include:

(a) Regulating the business in stock exchanges and any other securities markets;

(b) Registering and regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other intermediaries who
may be associated with securities markets in any manner;
(c) Registering and regulating the working of the depositories, participants, custodians
of securities, foreign institutional investors, credit rating agencies and such other

intermediaries as the Board may, by notification, specify in this behalf;
(d) Registering and regulating the working of venture capital funds and collective investment
schemes, including mutual funds;
(e) Promoting and regulating self-regulatory organisations;
(f) Prohibiting fraudulent and unfair trade practices relating to securities markets;
(g) Promoting investors’ education and training of intermediaries of securities markets;

(h) Prohibiting insider trading in securities;

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