Blog Details

Author - Associate Aliza Abdin

SEBI, short for The Securities and Exchange Board of India was established under the SEBI Act, 1992 as a regulatory body. Earlier, in 1988, it acted as a non-statutory body before the Government of India gave it the status of a regulatory body and created the SEBI Act, 1992. It is the chief regulator of stock exchanges in India, and it also lays down the guidelines for public and rights issues. It functions to protect the investor’s interests and to promote the Indian securities markets.

EXPLANATION:

The SEBI is a special platform to encourage, advance and regulate the stock investors from India and from foreign countries. Although for the foreign portfolio investors it is mandatory to register with DDPs to mandate participation in the Indian securities markets. It has its headquarters at Bandra Kurla Complex in Mumbai, India.

 The government of India allows the SEBI to enforce and make laws to monitor the stock exchange. It can also reject laws relating to the stock exchanges. Another major function of the SEBI is to encourage the companies to present their shares in stock exchanges and bring out the registration of distributors.

It has a complex structure consisting of many departments and each department has a head. It has Ajay Tyagi as its chairman.

Some of the major departments include: foreign portfolio investors, communications, human resources, collective investment schemes, commodity and derivative market regulation, legal affairs department, etc.

The checklists have been revised and are now based on the ICDR regulations and the listing regulations issued by the SEBI comprising of all amendments until February 2018. The SEBI has also approved ICDR (the issue of capital and disclosure requirements) regulations to monitor all IPOs that hit the stock market. The ICDR regulations intend at simplifying the language and guidelines of stock exchanges.

POWERS OF SEBI:

For the proper working of the SEBI, it has been vested with certain powers, with the help of which it can regulate the stock market. Some of them are as follows:

1. To make and reject laws, pertaining to the security exchanges

2. To inspect the books of accounts of various stock holder companies

3. To call for periodical returns of the books of accounts

4. To oblige specific companies to list their shares

5. To register brokers and sub-brokers

NEW AMENDMENTS

When the stock market was introduced in India, it had many defects and malpractices were very frequent, since then there have been many major amendments in the SEBI ICDR to improve its working which has made the stock market user friendly and fair. It has also made certain rules and regulations mandatory to follow in order to be a part of the market. They were announced in agreement to the report of the committee on Fair Market Conduct which pleaded for tighter rules to prevent use of unfair means inside the stock market.

The SEBI has issued the SEBI (Prohibition of Insider Trading) Amendment Regulations, which came into effect on 21st January 2019. This amendment has made the following changes in the SEBI:

The words “member of the promoter group”, has been inserted in Regulation 7(1)(a) & 7(2)(a) and the words “promoter or member of the promoter group” have been inserted in Regulation 7(1)(b).

These amendments will put the following responsibilities on the promoter group –

·         Regulation 7(1)(a) – All members of the promoter group are required to furnish their shareholding position as on 21st January, 2019 to the Company within 30 days thereof.

·         Regulation 7(1) (b) – On becoming a promoter or member of the promoter group, such a person is now required to furnish their shareholding position as on the date of becoming so, to the Company within 7 days thereof.

Regulation 7(2)(a) – Members of the promoter group are now required to report trades in excess of Rs.10 Lakhs to the Company within 2 trading days which are to be onward intimated by the Company (including Company becoming aware of such trades) to the exchanges within further 2 trading days. 

IMPORTANCE OF SEBI:

SEBI was formed most importantly to put an end to malpractices prevailing in the market. It monitors and checks the use of any unfair means or any fraud in the market. Since the creation of the SEBI, it has maintained transparency in the stock market. And has also helped millions of stockholders fulfill their needs.

It takes care of three major entities, they are as follows:

1.  Security issuer

2.  Intermediary

3.  Investor

It helps the country’s economy by making sure of the following points:

1.  It monitor’s the working of mutual funds

2.  It keeps a check on the illegal practices of the firm

3. It protects the investor’s interests

4. Controls the working of stock exchanges in India

5. It prohibits any insider activity taking place in the market