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Essay on  SEBI

Essay Contents:

  1. Essay on the Introduction to SEBI
  2. Essay on the Formation of SEBI
  3. Essay on the Objectives of SEBI
  4. Essay on the Organisation of SEBI
  5. Essay on the Powers of SEBI
  6. Essay on the Functions of SEBI

Essay # 1. Introduction to SEBI:


The Government’s avowed interest in regulating the capital market and safeguarding the retail investors lead to the creation of Securities and Exchange Board of India and subsequent reforms in the market. These significant events in the past decade have changed the course of the Indian capital market.

The IPOs in the primary market and several secondary market practices got changed affecting the prime constituent of the capital market, the individual investor. There cannot be two opinions on the fact that SEBI has, by its guidelines, regulations and directions, statutorily promoted disclosure of all relevant information and has strengthened the protection to investors in the securities market.

Essay # 2. Formation of SEBI:

The Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution in 1988, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992.


Relatively a brief act containing 35 sections, the SEBI Act governs all the Stock Exchanges and the Securities Transactions in India. It has been set up as a statutory and autonomous regulatory board with independent powers and defined responsibilities, to cover both development & regulation of the Capital market. It may be said that this is a positive outcome of the Securities Scam of 1990-91.

Essay # 3. Objectives of SEBI:

SEBI was set up to assist and facilitate the mobilization of adequate resources through the securities market and its efficient allocation, keeping in mind the interest of issuers, investors and intermediaries.

The primary-objectives of SEBI are:


I. To protect the interests of investors in securities;

II. To promote the development of Securities Market;

III. To regulate the securities market; and

IV. For matters connected therewith or incidental thereto.


Protect the Interests of Investors:

SEBI endeavours to restore and safeguard the trust of investors, especially the interest of small investors. This is achieved by meeting the needs of the players connected with securities market such as the investors, the corporate sector and the intermediaries. It works for creating proper investment climate to enable corporate sector to float industrial securities easily, efficiently and at affordable minimum cost.

It aims at educating investors so as to make them aware of their rights in clear and specific terms by providing them with information. A high degree of protection of investor rights and interests is made possible by providing adequate, accurate and authentic information on a continuous basis.

Promote the Development of Securities Market:


Since its inception SEBI has been working targeting the securities and is attending to the fulfillment of its objectives with commendable zeal and dexterity. The improvements in the securities markets like capitalization requirements, margining, establishment of clearing corporations etc. reduced the risk of credit.

SEBI adopts two broad approaches to develop the securities market – to integrate the securities market at the national level and to diversify the trading products – so that there is an increase in number of traders including banks, financial institutions, insurance companies, mutual funds, and primary dealers etc. to transact through the exchanges.

In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in the year 2000 provided the much needed depth to the securities market.

Regulation of the Securities Market:


SEBI has introduced comprehensive regulatory measures, prescribed registration norms, eligibility criteria, code of obligations and the code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating agencies, underwriters and others.

It has framed by-laws, risk identification and risk management systems for Clearing houses of stock exchanges, surveillance system etc. which has made dealing in securities both safe and transparent to the end investor.

Essay # 4. Organisation of SEBI:

The SEBI is a body corporate. Under Section 4 of the SEBI Act, the management of SEBI is entrusted with the Board of Directors.


The Board consists of:

(i) A Chairman appointed by the Government,

(ii) Two members from amongst officials of the Ministry of Government of India dealing with Finance and administration of the Companies appointed by the Government,

(iii) One member from amongst the officials of, and nominated by RBI,

(iv) Five members of whom at least two should be whole time members nominated by the Government. Its general superintendence, direction and management are vested in a Board of Members which may exercise all powers and do all acts/things which may be exercised/done by the SEBI.

The Chairman also has powers to general superintendence and direction of its affairs and may also exercise all powers and do all acts/things exercisable/done by it. The Chairman and other members of the SEBI should be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to the securities market or have special knowledge/experience of law, finance, economics, accountancy, administration or in any other discipline which, in the opinion of the Government, would be useful to the SEBI.


The Central Government reserves the right to terminate the services of the Chairman or any member of the Board. SEBI has its head office in Mumbai and regional offices at Delhi, Calcutta and Chennai.

Essay # 5. Powers of SEBI:

Section 11 of the SEBI Act provides that, it is the duty of the Board to protect the interest of investors in securities and to promote the development of and to regulate the securities market by such measures as required.

The Act has given power to the Board to regulate the business in Stock Exchanges, register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, etc., also to register and regulate the working of collective investment schemes including mutual funds, to prohibit fraudulent and unfair trade practices and insider trading, to regulate take-over, to conduct enquiries and audits of the stock exchanges, etc.

All the stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deed, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediary who may be associated with the Securities Markets are to register with the Board under the provisions of the Act, under Section 12 of the SEBI Act. The Board has the power to suspend or cancel such registration. The Board decides issues in its meetings by majority vote with the Chairman having a second or casting vote.

The Board is bound by the directions vested by the Central Government from time to time on questions of policy and the Central Government reserves the right to supersede the Board. The Board is also obliged to submit a report to the Central Government each year, giving true and full account of its activities, policies and programmes. Any one of the aggrieved by the Board’s decision is entitled to appeal to the Central Government.


Essay # 6. Functions of SEBI:

SEBI has three functions rolled into one body-legislative, judicial and executive. It drafts rules in its legislative capacity, it conducts enquiries and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it exceedingly powerful, there is an appeal process to create accountability.

Its main functions are:

I. Helping the business in stock exchanges and any other securities markets,

II. Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner.

III. Registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf.


IV. Registering and regulating the working of venture capital funds and collective investment schemes including mutual funds;

V. Promoting and regulating self-regulatory organisations;

VI. Prohibiting fraudulent and unfair trade practices relating to securities markets;

VII. Promoting investors’ education and training of intermediaries of securities markets;

VIII. Prohibiting insider trading in securities;

IX. Regulating substantial acquisition of shares and takeover of companies;


X. Calling for information from undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds and other persons associated with the securities market and intermediaries and self-regulatory organisations in the securities market;

XI. Calling for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which is under investigation or inquiry by the Board;

XII. Performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) Act, 1956, as may be delegated to it by the Central Government;

XIII. Levying fees or other charges for carrying out the purpose of this section;

XIV. Conducting research for the above purposes;

XV. Calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;


XVI. Performing such other functions as may be prescribed.

In addition, it may also take measures to undertake inspection of any book, register, or other document or record of any listed public company or public company which intends to get its securities listed on any recognised stock exchange where the SEBI has reasonable grounds to believe that such company has been indulging in insider trading and unfair trade practices relating to the securities market.

SEBI has had a mixed history in terms of its success as a regulator. Though it has pushed systemic reforms aggressively and successively (e.g., the quick movement towards making the markets electronic and paperless), it seems to lack the legal expertise needed to sustain prosecutions/enforcement actions. It has often received flak from the appellate body known as the Securities Appellate Tribunal (SAT). From the SAT, an appeal moves straight to the Supreme Court of India.


To conclude, SEBI by its guidelines, regulations and directions, statutorily promoted disclosure of all relevant information has strengthened the securities market. Still there exist some worries among investors. Their biggest worry is ‘too much volatility’. The next major worry is ‘too much price manipulation of stocks’. They also worry about ‘fraudulent company managements’ and ‘unfair practices of brokers’. However, they are not that much worried about the cost of dematerialization.

More than three fourths of the sample investors feel good about the capital market regulation in our country. This is a congratulatory message for the SEBI for its remarkable regulatory service to the Indian capital market. The sample investors from Ahmedabad have given more excellent ranks and sample investors from Chennai have given a higher proportion of very poor rank to the capital market regulation. The investors’ opinion on capital market regulation differs based on their city of living.

The sample investors are undecided about ‘rumours causing extensive damage to the market have diminished significantly’ and ‘the key players such as issuers, merchant bankers, DPs, brokers are controlled’. However, they have confidence in SEBI and they hope there is a lesser chance for the recurrence of scams like that of previous years.

A large number of sample investors know how to approach SEBI to get their investment grievance resolved. But they are skeptical about SEBI helping them in getting their grievances solved. They want SEBI to take steps to resolve the grievances rather than acting like a post office, only transmitting letters from investors to companies.

A large number of investors want SEBI to advertise the information relating to investor protection through newspapers, business television channels and depository participants. They have also suggested some new ways of spreading this message. Lastly the investors have suggested several areas in which reforms need to be introduced.

Brought out investors’ experiences opinions and suggestions relating to SEBI and related issues which if given the required attention would help in restoring the confidence of individual investors on Indian capital market.