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Unit 7: Depositories and Custodians

7.2 SEBI: Guidelines with Respect to Depositories Notes

The Securities and Exchange Board of India (SEBI) has set up the SEBI Act 1992 to:
1. To protect the interest of investors in securities.
2. Promote the development of, and regulate, the securities market.

It prevents the trading malpractices and aims at achieving a balance between self-regulation by
securities industry and its statutory regulation.

Interim Functions

1. To collect information and advice the Government on the matters relating to stock and
capital markets.
2. Licensing and regulation of merchant banks, mutual funds etc.
3. To prepare legal drafts for regulatory and development role of SEBI.
4. To perform any other functions as may be entrusted to it by the Government. There are
certain malpractices noticed in the case of companies, merchant bankers and brokers who
are all operating in the capital market. The security industry in India had to develop on the
right lines.

Objectives

The SEBI has been entrusted with both the regulatory and developmental functions. The objectives
of SEBI are:
1. Investor protection, so that there is steady flow of savings into the capital market.
2. Ensuring the fair practices by the issues of securities, namely, companies so that they can
raise resources at least cost.
3. Promotion of efficient services by brokers, merchant bankers and other intermediaries so
that they become competitive and professional.

SEBI (Issue Guidelines in respect of)

1. Information disclosure operational transparency and investor protection

2. Development of financial institutions
3. Pricing of issue
4. Preferential issues
5. Bonus issues

6. Financial instruments
7. Firm allotment and transfer of shares among promoters.
The SEBI is empowered to register any agency or intermediary who may be associated with the
securities market and none of them shall buy, sell or deal in securities except under and in
accordance with the conditions of a certificate of registration issued by the SEBI.

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