Page 60 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 5: Securities and Exchange Board of India

5.1 SEBI Functions and Responsibilities Notes

Chapter IV of the SEBI Act, 1992 deals with the powers and functions of the board. SEBI has to be
responsive to the needs of three groups, which constitute the market:

1. Issuers of securities
2. Investors
3. Market intermediaries.

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-executive.
It drafts regulations in its legislative capacity, it conducts investigation and enforcement action
in its executive function and it passes rulings and orders in its judicial capacity. Though this
makes it very powerful, there is an appeals process to create accountability. There is a Securities
Appellate Tribunal which is a three member tribunal. A second appeal lies directly with the
Supreme Court.

5.2 Guidelines

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively.

Example: On April 1, 2003, SEBI made it compulsory for all transactions in all groups of
securities in the equity segment and fixed income securities listed on BSE, to be settled within 2
days after the trade day. (T+2 rolling settlement). This made a quick movement of the market to
get electronic and paperless.

SEBI has been active in setting up the regulations as required under law.
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:
1. 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 market in any manner.
2. 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 the behalf.
3. Registering and regulating the working of venture capital funds and collective investment
schemes, including mutual funds.

4. Promoting and regulating self-regulatory organizations.
5. Prohibiting fraudulent and unfair trade practices relating to securities markets.
6. Promoting investors education and training of intermediaries of securities markets.

7. Prohibiting insider trading in securities.
8. Regulating substantial acquisition of shares and takeover of companies.
9. Calling for information from, undertaking inspection, conducting inquiries and audits of
the stock exchanges, mutual funds, other persons associated with the securities market,
intermediaries and self-regulatory organizations in the securities market.

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