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Indian Financial System

Notes result, interests of the investors suffered grievously. It was, therefore, considered necessary to
set up an apex body at the national level to provide the investors with an organized and well-
regulated market place. Accordingly, the SEBI was established in 1988 by the Government of
India through an executive resolution, and was subsequently upgraded as a fully autonomous
body in the year 1992 with the passing of the SEBI Act on 30th January, 1992. Thus, in place of
government control, a statutory and autonomous regulatory board with defined powers and
responsibilities, to cover both development and regulation of the market, was set up.

The basic objectives of the SEBI were identified as:
1. To protect the interests of investors in securities;
2. To promote the development of the securities market;
3. To regulate the securities market; and

4. Also for matters connected therewith or incidental thereto.

14.2.2 Tasks of the SEBI

So as to ensure that interests of the investors are well protected and the development of the
securities market is well fostered, the SEBI has been assigned two major tasks, viz., regulatory
and developmental.
Under regulatory function, the SEBI is required to carry out the job of regulating the business in
stock exchanges and other securities market, registering and regulating the working of stock
brokers, sub-brokers, share transfer agents, bankers to an issue, merchant bankers, underwriters,
etc., and regulating the working of collective investment schemes including mutual funds.
Another regulatory function of the SEBI is to prohibit fraudulent and unfair trade practices and
take power of companies.

The SEBI has to perform as a development institution in order to serve as an effective body to
develop securities market and safeguard interests of the investors. The SEBI has to educate
investors and make them aware of their rights in clear and specific terms and train
intermediaries. It is also required to promote self-regulating organization. The SEBI is also
expected to help the corporate sector in raising funds through securities without any problem
and at a low cost. The SEBI is required to develop a proper infrastructure so that the market
automatically facilitates expansion and growth of business to middlemen like brokers, jobbers,
commercial bankers, mutual funds, etc. It is also expected to make more effective the law in
the existing status as far as they relate to the industrial securities, mutual funds, investment in
units, LIC savings plan, Chit fund companies and securities issued by housing/industrial
societies and corporations with the purpose of making investment in housing/industrial
projects. The SEBI has to create the framework for more open, orderly and objective conduct in
respect of takeovers and mergers so as to ensure fair and equal treatment to all security
holders and facilitate such takeovers and mergers in the efficient manner by prescribing a
mechanism for a more orderly conduct.
Finally, the SEBI is expected to conduct research and publish information useful to all market
players.

14.2.3 Powers of SEBI

The SEBI has been vested with powers both by the SEBI Act and the SCR Act.

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