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Unit 14: Regulation and Securities Markets in India

regulation of all market intermediaries, and for the prevention of unfair trade practices, insider Notes
trading, etc. Under these Acts, the Government and SEBI issue notifications, guidelines, and
circulars that the market participants need to comply with. The SROs, like the stock exchanges,
have also laid down their own rules and regulations.
Major part of the liberalisation process was the repeal of the Capital Issues (Control) Act, 1947,
in May 1992. With this, Government’s control over issues of capital, pricing of the issues, fixing
of premium and rates of interest on debentures etc. ceased, and the office which administered
the Act was abolished: the market was allowed to allocate resources to competing uses. However,
to ensure effective regulation of the market, SEBI Act, 1992 was enacted to establish SEBI with
statutory powers for:
(a) Protecting the interests of investors in securities,
(b) Promoting the development of the securities market, and

(c) Regulating the securities market.
Its regulatory jurisdiction extends over companies listed on Stock Exchanges and companies
intending to get their securities listed on any recognised stock exchange in the issuance of
securities and transfer of securities, in addition to all intermediaries and persons associated with
securities market. SEBI can specify the matters to be disclosed and the standards of disclosure
required for the protection of investors in respect of issues; can issue directions to all
intermediaries and other persons associated with the securities market in the interest of investors
or of orderly development of the securities market; and can conduct enquiries, audits and
inspection of all concerned and adjudicate offences under the Act. In short, it has been given
necessary autonomy and authority to regulate and develop an orderly securities market.

Notes All the intermediaries and persons associated with securities market, viz., brokers
and sub-brokers, underwriters, merchant bankers, bankers to the issue, share transfer
agents and registrars to the issue, depositories, depository participants, portfolio managers,
debentures trustees, foreign institutional investors, custodians, venture capital funds,
mutual funds, collective investments schemes, credit rating agencies, etc., shall be registered
with SEBI and shall be governed by the SEBI Regulations pertaining to respective market
intermediary.

14.3.1 Constitution of Securities and Exchange Board of India (SEBI)

The Central Government has constituted a Board by the name of SEBI under Section 3 of SEBI
Act. The head office of SEBI is in Mumbai. SEBI may establish offices at other places in India.

SEBI consists of the following members, namely:
(a) A Chairman;
(b) Two members from amongst the officials of the Ministries of the Central Government
dealing with Finance and administration of Companies Act, 1956;
(c) One member from amongst the officials of the Reserve Bank of India;
(d) Five other members of whom at least three shall be whole time members to be appointed
by the Central Government.
The general superintendence, direction and management of the affairs of SEBI vests in a Board of
Members which exercises all powers and do all acts and things which may be exercised or done
by SEBI.

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