SEBI

Securities & Exchange Board of India

SEBI was formulated on the lines of securities

Exchange Commission of USA. The main role
of SEBI is to act as a regulator of the capital
markets and its constituents. These powers
were initially with the Central Government
Ministries like Law, Finance & Company affairs.
These powers are now given to SEBI and it has
become the sole regulator of the capital
markets.
 Origin of the SEBI
• Until SEBI came into functioning, the capital issues in India were
regulated by the Capital Issues (control) Act 1947.

• This act was intended to insure that whatever investment is made

in the private corporate sector, it does not violate priorities and
objectives laid down in the 5 years plans or flow into unproductive
sector.
• Also it is to be seen that the expansion of private corporate sector
are on sound lines in general, and further the growth of the
particular corporate enterprises takes place only when it is
accompanied with sound capital structure.
• Moreover it should facilitate the distribution of capital issues time
wise in such a manner that there is no overcrowding in a particular
period. Thus the task of administering the capital issue control in
accordance with the principle and policies laid down by the Central
Government was entrusted to the Controller of Capital Issues (CCI).
• Prior approval of the CCI was necessary for any issues in the market.
 Origin of the SEBI …
• The Narasimhan Committee in its report on the Financial Systems submitted in
1991 argued that the capital market was lightly controlled by the government
and there were number of restriction placed by the CCI on the operations of this
market.

• This restrictive environment was ‘neither in tune with the new economic reforms
nor conductive to the growth of the capital market.’

• The Committee strongly favored substantial and speedy liberalization of the

capital market by closing down the office of the CCI.

• It suggested that SEBI setup in 1988 should be entrusted with the task of ‘a
market regulator to see that the market is operated on the basis of well laid
principles and conventions.’ However, SEBI should not become a controlling
authority substituting the CCI.

• SEBI was initially constituted on 12 April 1988 as a non statutory body through a
resolution of the government for dealing with all matters relating to
development and regulation of securities market and investor protection and to
advise the Government on all these matters.

• SEBI was given statutory status and power through an ordinance promulgated
(announced) on January 30, 1992.
 Objectives/Purposes/ of the SEBI
1. To insure that whatever investment is made in the private
corporate sector, it does not violate priorities and objectives laid
down in the 5 years plans or flow into unproductive sector.
2. To promote the expansion of private corporate sector are on sound
lines in general, and further the growth of the particular corporate
enterprises takes place only when it is accompanied with sound
capital structure.
3. To distribute the capital issues time wise in such a manner that
there is no overcrowding in a particular period. Thus the task of
administering the capital issue control in accordance with the
principle and policies laid down by the Central Government was
entrusted to the Controller of Capital Issues (CCI). Prior approval of
the CCI was necessary for any issues in the market.
4. To protect the interests of investors in securities
5. To promote the development of the securities market.
6. To regulate the securities market.
7. For maters connected there with or incidental there to.
 Management of the Board Sec 4
The SEBI will be managed by a board consisting of the following
1. Chairman (nominated by Central Government)
2. Two members from among the official of the ministries of Central
government dealing with Finance and Law.
3. One member from amongst the official of the RBI.
4. Two other members to be appointed by the Central government.
5. The management of SEBI will be vested in the Board and Chairman shall have
the powers of general superintendence and direction.
6. The office of SEBI is situated at Mumbai with its regional offices at Kolkatta,
Delhi & Chennai. In 1988 the capital of SEBI was Rs 7.5 crore which was
provided by its promoters (IDBI, ICICI & IFCI).This amount was invested and
with its interest amount day to day expenses are met.
 Functions of SEBI
1. Regulating the business in stock markets and other securities markets.
2. Registering and regulating the working of stock brokers and other
intermediaries associated with the securities markets.
3. Registering and regulating the working of collective investment schemes
including mutual funds.
4. Promoting and regulating the self regulatory organizations.
5. Prohibiting fraudulent and unfair trade practices relating to securities
markets.
6. Promoting investors education and training of intermediaries of securities
markets.
7. Prohibiting Insider Trading in securities.
8. Regulating substantial acquisition of shares and takeover of companies.
9. Performing such functions and exercising such powers under the
provisions of the Capital Issues (Control) Act, 1947 and Securities Contract
(Regulations) Act, 1956, as may be delegated to it by the Central
Government.
10. Levying fees or other charge for carrying out the purposes of this section.
11. Conducting research for the above purposes.