SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

Establishment & Evolution

• Constitution as a Non-Statutory Body: SEBI was constituted in 1988 through a Government of India resolution.​
• Statutory Status: In 1992, SEBI was established as a statutory body under the SEBI Act, 1992.​
• Headquarter: Mumbai, Maharashtra.​

Objectives of SEBI

• Investor Protection: Safeguarding the interests of investors in securities.​
• Market Development: Promoting the development of the securities market.​
• Market Regulation: Regulating the securities market to ensure its orderly functioning.​

Functions of SEBI

• SEBI performs three key functions:​

Protective Functions:

• Prohibiting fraudulent and unfair trade practices.
• Prohibiting insider trading.
• Regulating substantial acquisition of shares and takeover of companies.
• Promoting fair practices and code of conduct in securities markets.​

Regulatory Functions:

• Registering and regulating the working of stock brokers, sub-brokers, and other intermediaries.
• Registering and regulating the working of collective investment schemes, including mutual funds.
• Promoting and regulating self-regulatory organizations.
• Prohibiting fraudulent and unfair trade practices related to securities markets.​

Developmental Functions:

• Training of intermediaries of securities markets.
• Conducting research and publishing information useful to all market participants.
• Promoting investor education and training of intermediaries.
• Prohibiting insider trading and other unfair trade practices.​

Recent Initiatives by SEBI

SCORES 2.0:

• An upgraded version of the SEBI Complaints Redress System (SCORES).
• Ensures redressal of investor complaints within 21 calendar days from the receipt date.
• Introduces auto-routing of complaints to the concerned regulated entity.​

Prohibition of Insider Trading (PIT) Regulations:

• Amended regulations to provide flexibility to insiders for trading plans.
• Insiders must declare a trading plan in advance, specifying share price and transaction date.​

Credit Default Swaps (CDS):

• Allowed mutual funds to buy and sell CDS to improve liquidity in the corporate bond market.
• CDS functions like insurance, protecting against default by the bond borrower.​

Pump & Dump Scheme:

• Banned individuals from operating pump and dump schemes, which involve artificially inflating a stock's price through false and misleading information.​

Exchange-Traded Funds (ETFs):

• Raised investment limits for passive funds and ETFs.
• ETFs are marketable securities that track an index, a commodity, bonds, or a basket of assets like an Index Fund.​

Clearing Corporations (CC):

• Formed a committee to review the ownership and economic structure of clearing corporations.
• CCs manage clearing and settlement of trades on stock exchanges.​

Fin fluencers:

• Prohibited regulated entities from engaging with unregistered finfluencers.
• Finfluencers are individuals sharing financial advice on topics like stock trading, mutual funds, and insurance, primarily via social media.​

Significance of SEBI in India's Financial Ecosystem

• Investor Confidence: SEBI's regulatory framework ensures transparency and fairness, thereby boosting investor confidence in the securities market.​
• Market Integrity: By prohibiting fraudulent practices and ensuring fair trading, SEBI maintains the integrity of the securities market.​
• Financial Inclusion: SEBI's initiatives like investor education programs and the promotion of mutual funds contribute to financial inclusion by encouraging more individuals to participate in the financial markets.​
• Global Recognition: SEBI's adherence to international standards and its proactive approach to market regulation have garnered global recognition, enhancing India's position in the global financial landscape.​