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Unit 14: Regulatory Environment

of the investment and investment related services, it is appropriate to know Securities and Notes
Exchange Board of India which is emerging as a powerful regulator of various financial services.

14.5.1 The Securities and Exchange Board of India (SEBI)

The complex nature of financial markets and high level of integration of different segments of
the market, the National Securities Exchange Commissions have been set up to monitor the
activities of financial markets and the service providers in order to ensure healthy development
of the market and safeguards the interest of investors.
On the suggestion of the high powered Committee on the Stock Exchange Reforms headed by
G.S.Patel, the Government of India has set up the Securities and Exchange Board of India on 12th
April, 1988. The Board initially functioned as advisory agency but in 1992, the SEBI has been
given the legal status by the Securities and Exchange Board of India Ordinance 1992 which has
been subsequently passed in the Parliament to become an Act. The SEBI Act, 1992 entrusts the
responsibility of protecting the interest of investors in securities and to promote the development
of, and to regulate securities market by such measure it thinks fit. The Act also listed a few
activities that SEBI could perform to achieve the above objectives. They are:

(a) Regulating the business of stock exchanges and any other securities markets;
(b) Registering and regulating the working of stock brokers, sub-brokers, share transfer
agent, merchant bankers and other intermediaries who may be associated with securities
market in any manner;
(c) Registering and regulating the working of collective investment schemes including mutual
funds;
(d) Promoting and regulating self-regulatory organisations;
(e) Prohibiting fraudulent and unfair trade practices relating to securities markets;
(f) Promoting investors education and training of intermediaries of securities markets;

(g) Prohibiting insider trading in securities;
(h) Regulating substantial acquisition of shares and take-over of companies;
(i) Calling for information from, undertaking inspection, conducting enquires and audits of
the stock exchanges, intermediaries and self-regulatory organisations in the securities
markets;
(j) Performing such functions and exercising such powers under the SCRA, 1952 as may be
delegated to it by the Central Government;
(k) Levying fees or other charges for carrying out these activities;
(l) Conducting research for the above purpose; and

(m) Performing such other functions as may be required.
The SEBI has, during the period of five years of its existence since it received legal status,
brought out a number of regulations and guidelines to bring an orderly functioning of the
securities markets. It has also created special wings for Primary Market, Secondary Market,
Mutual Funds, Surveillance, Research, etc. These regulations and guidelines serve the basic
structure of regulatory framework for several financial services. The SEBI Act also provides that
parties aggrieved by its order can appeal to the Central Government within a prescribed time
limit.

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