What is SEBI? History, Functions, Authority and Powers

You would have definitely heard about SEBI at some point in your investment journey. SEBI or Securities and Exchange Board of India is a regulatory body which regulates the Indian stock exchanges and financial markets.

Stock exchanges, stocks, mutual funds, bonds and almost every other financial product and player in the Indian financial markets is regulated by SEBI. SEBI is a regulatory body under the Ministry of Finance division of Government of India. It was established in the year 1988 with an aim to protect the interest of the investors and also to develop the Indian capital markets to the latest standards by regulating and enforcing the required rules and regulations.

Today let us take a look at the history of Securities and Exchange Board of India. We will also discuss about the structure, functions, authority, and powers of SEBI. O without further ado, let us discuss about each one of these in detail.

Securities and Exchange Board of India (SEBI)

• History of SEBI
• Structure of SEBI
• Functions of SEBI
• Authority and Power of SEBI

History of SEBI

SEBI or the Securities and Exchange Board of India was first established as a no-statutory body in the year 1988. It was established with the aim to regulate the Indian securities and capital markets. SEBI gained statutory powers and was declared an autonomous body when the SEBI Act of 1992 was passed by the parliament on 30th January 1992.

SEBI is a regulatory body under the Ministry of Finance division of government of India. SEBI has its head office located in Bandra Kurla Complex, Mumbai. The SEBI has regional offices in North, South, West, and East regions of the country. These offices are situated in New Delhi, Chennai, Ahmedabad, and Kolkata respectively.

Before SEBI, the Indian financial markets were regulated by the Controller of Capital Issue which was established under the Capital Issues Act of 1947.

Structure of SEBI

SEBI is a body which is managed by its members. SEBI comprises of various departments under a corporate framework which are managed by department heads. There are a total of around 20 departments in SEBI. These departments include legal affairs, corporation finance, debt and hybrid securities, enforcement, economic and policy analysis, commodity derivatives market regulation and many more. SEBI has a hierarchical structure consisting of these members:

• The head of SEBI is the chairman who is nominated by the Union Government of India.
• Union Finance Ministry appoints two of its officers as a part of the structure.
• Reserve Bank of India appoints one member.
• The Union Government of India nominates five members.

Functions of SEBI

SEBI was established for performing various functions. Some of the primary functions of SEBI include:

• Protecting the interest of investors in the Indian capital markets.
• Registering and regulating stockbrokers, investment advisors, portfolio managers, merchant bankers, underwriters, registrars, share transfer agents and other associated professionals and entities.
• Inspecting the books of accounts of recognized stock exchanges and financial intermediaries.
• Development and evolution of the Indian Securities Markets to the latest standards.
• Enforcing various rules and regulations for smooth functioning of the capital markets and also approving by-laws of stock exchanges.
• Prohibit unfair and fraudulent trade practices in the securities markets.
• Provide a Complaint and Redressal Platform (SCORES) for investors and other players of the Indian financial markets.
• Regulating the operations of intermediaries like depositories, credit rating agencies, foreign portfolio investors, custodians etc.

Authority and Power of SEBI

SEBI is a very powerful body because it has three powers rolled in a single body. These powers are:

• Quasi Legislative – SEBI can draft rules and regulations under this power.
• Quasi Executive – This power allows SEBI for conducting investigations and enforce required actions.
• Quasi Judicial – SEBI can pass orders and rules under its judicial capacity.

To create accountability, there is an appeal process, where an appeal can be raised to Securities Appellate Tribunal. It is a three-member body which hears and disposes the appeals against the orders passed by SEBI. After the Tribunal, a second appeal can also be raised to the Supreme Court of India.

Conclusion

SEBI has transformed the Indian capital markets. It has enjoyed huge success as a regulatory body by enforcing rules and reforms systematically and aggressively. From quick transformation to electronic trading to reducing the settlement cycle to T+2 days, SEBI is credited for various initiatives. Therefore, when you enter the world of Indian Capital Markets, it is very important to validate whether your Stockbroker or Investment Advisor are registered with SEBI or not. If they are not, it is recommended to stay away from them!

Happy Investing!

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