How Does SEBI (Securities and Exchange Board of India) Control Capital Market of India?

The Securities and Exchange Board of India or SEBI is the main regulatory body who looks after the functioning of securities market in India. SEBI was constituted in 12th April 1988 as a non-contributory body through a resolution of the government. SEBI looks after investor protection and advices the government on all such matters.

SEBI received the statutory status and powers through an ordinance which was promulgated on 30th January 1992. The same is also referred to as the SEBI act of 1992. SEBI has a dedicated platform for investor grievance and redressal which is known as SEBI Complain and Redressal System (SCORES).

Let us now take a look at the organizational structure of SEBI and also learn about the decisions and functions, performed by SEBI to control the Capital markets of India.

Table of Content

Role of SEBI in Capital Market

1. Organizational Structure of SEBI
2. Functions of SEBI
3. Decisions Taken by SEBI to Ensure a Healthy Capital Market

So, without further ado, let us learn about all these pointers and have detailed insights into the functioning and operations of SEBI.

1. Organizational Structure of SEBI

SEBI consists of a chairman and six members, which are nominated by the Central Government. There are two members who are officers from central ministries. SEBI also consists of one member from the Reserve Bank of India and two members nominated by the Central Government. The SEBI headquarters are located in Mumbai, with branch offices in the remaining metros of India, namely Delhi, Kolkata and Chennai.

SEBI was formed with an initial capital of 7.5 crore INR in 1988. The funding was provided by the promoters - IDBI, ICICI and IFCI. This amount was invested, and the interest generated on the same is usually used for all day to day expenses of the department. All statutory powers for regulating the Indian capital markets are vested with SEBI.I

2. Functions of SEBI

Let us now discuss about the functions performed by the Securities and Exchange Board of India. The key functions of SEBI include:

1. Regulating the Capital Markets by undertaking suitable measures2. Safeguarding the interest of investors3. Regulating the functioning of stock exchanges and security markets4. Regulating the functioning of Stockbrokers and transfer agents, merchant bankers etc.5. Registration of Brokers, Investment Advisors and other entities6. Encouraging Self-Regulatory Organizations (SRO)7. Eliminating the loopholes and malpractices in the security markets8. Ensuring investor’s education9. Management of Complaint and Redressal System for investors (SCORES)10. Ensuring systematic dealings and supervising the overall functioning of the system

These are some of the key functions which are performed by SEBI. There are various other functions as well which the regulator looks after.

3. Decisions taken by SEBI to ensure a healthy Capital Market

SEBI is the regulatory body for the Indian capita markets and has adopted various steps and functions to ensure smooth and healthy functioning of the capital markets. Let us take a look at some of them.

• Determination of Premium and Share Prices: As per the latest announcement of SEBI, all listed Indian companies have been given a free hand in determining their stock prices and premium on those prices. However, SEBI ensures that the determined pricing and premium is equally applicable for all without any sort of discrimination.
• Eligibility Criteria for Under Writers: SEBI has fixed the minimum asset limit at 20 lakhs INR to work as an under writer. Also, SEBI looks after the functioning if under writers as well and holds the full authority to cancel their registration if any irregularity is found in the purchase of unsubscribed part of the share issue.
• Abolishing Insider Trading: Insider Trading was one of the biggest loopholes of the Indian Capital Markets. A recent web series has also portrayed, how insider trading was used for making huge profits. SEBI introduced the SEBI regulation 1992 which ensures honesty and transparency in the Capital Markets.
• The control on Mutual Funds: SEBI announced the SEBI Mutual Funds Regulation in 1993 which gave the authority to take over the direct control of all mutual funds of private sector and government. As per the announcement, any company which floats a mutual fund should necessarily have net assets worth over INR 5 Crores and should consist a contribution of at least 40% from the promoter.
• Control on FIIs: Foreign Institutional Investors or FIIs, now need to be registered with SEBI before they step in the Indian Capital Markets. The directives issued by SEBI in this regard state that every FII who is investing in Indian Capital Markets needs to have a SEBI registration.

These are some of the major directives and decisions which are undertaken by SEBI to ensure smooth and healthy functioning of the Indian Capital Markets.

ConclusionSEBI plays a very prominent role in the smooth functioning of the Indian Capital Markets. The constitution of SEBI ensured that the loopholes and fraudulent practices in the systems are eliminated. However, as an investor, it is important for you to understand your role and deal only with SEBI registered brokers and SEBI registered investment advisors, because these entities have been thoroughly verified by the SEBI.

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