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Securities and Exchange Board of India
A CRITICAL ANALYSIS
A Brief History
Prior to SEBI the security markets and stock exchange were regulated by
several Acts, which were:
• The Bombay Securities Contracts Control Act, 1925
• The Capital Issues (Control) Act, 1947
• The Securities Contracts (Regulation) Act, 1956
• Registrar of Companies (The Indian Companies Act, 1956)
For a healthy growth of capital markets and to prevent malpractices in
trading, the Government subsequently decided to “set up a separate board for
the regulation and orderly functioning of Stock Exchange and the securities
industry”
2
Introduction
• SEBI was established as a statutory authority through an Ordinance
promulgated on 30.01.1992 by the President of India
• SEBI is the regulator for the Securities Market in India
• It is managed by a Board comprising of nine members including the chairman
• Paradoxically this is a positive outcome of the Harshad Mehta Securities Scam
of 1990-91
3
SEBI - PREAMBLE
The Preamble of the Securities and Exchange Board of India describes
the basic functions of the Securities and Exchange Board of India as
"...to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters
connected therewith or incidental thereto"
4
Purpose and Role of SEBI
• SEBI was set up with the main purpose of keeping a check on malpractices
and protect the interest of investors. It was set up to meet the needs of three
groups
• Issuers:
• For issuers it provides a market place in which they can raise finance fairly and easily
• Investors:
• For investors it provides protection and supply of accurate and correct information
• Intermediaries:
• For intermediaries it provides a competitive professional market
5
Basic Objectives
• To protect the interests of investors in securities
• To promote the development of Securities Market
• To regulate the securities market and
• For matters connected therewith or incidental thereto
MET-IOM 6
Powers of SEBI
• Powers relating to stock exchanges and intermediaries:
• SEBI has wide powers regarding the stock exchanges and intermediaries dealing in
securities
• It can ask information from the stock exchanges and intermediaries regarding
their business transactions for inspection/scrutiny and other purposes
7
Powers of SEBI (Contd…)
• Powers relating to monetary penalties:
• SEBI’ has been empowered to impose monetary penalties on capital market
intermediaries and other participants for a range of violations
• It can even impose suspension of their registration for a short period
8
Powers of SEBI (Contd…)
• Powers to initiate actions relating to functions assigned:
• SEBI has a power to initiate actions in regard to functions assigned
• For example, it can issue guidelines to different intermediaries or can introduce
specific rules for the protection of interests of investors
Powers of SEBI (Contd…)
• Powers under Securities Contracts (Regulation) Act :
• For effective regulation of stock exchanges, the Ministry of Finance issued a
Notification on 13 September, 1994 delegating several of its powers under the
Securities Contracts (Regulation) Act to SEBI
• SEBI is also empowered by the Finance Ministry to nominate three members on
the Governing Body of stock exchange instead of earlier practice of government
making such nominations
Powers of SEBI (Contd…)
• Powers to regulate business of stock exchanges :
• SEBI is empowered to regulate the business of stock exchanges
• It also includes regulation of intermediaries associated with the securities market
as well as mutual funds, fraudulent and unfair trade practices relating to securities
and regulation of acquisition of shares and takeovers of companies.
Powers of SEBI (Contd…)
• Powers relating to insider trading:
• SEBI has power to regulate insider trading or can regulate the functions of
merchant bankers
Functions of SEBI
• The SEBI performs functions to meet its objectives.
• Functions can be broadly divided into:
• Protective functions
• Developmental functions
• Regulatory functions
Functions of SEBI (Contd…)
• Protective Functions-
• It Checks Price Rigging
• It Prohibits Insider trading
• SEBI prohibits fraudulent and Unfair Trade Practices
• SEBI undertakes steps to educate investors
• SEBI promotes fair practices and code of conduct in security market
Functions of SEBI (Contd…)
• Developmental Functions-
• SEBI promotes training of intermediaries of the securities market.
• SEBI tries to promote activities of stock exchange by adopting flexible and
adoptable approach in following way:
• SEBI has permitted internet trading through registered stock brokers.
• SEBI has made underwriting optional to reduce the cost of issue.
• Even initial public offer of primary market is permitted through stock exchange.
Functions of SEBI (Contd…)
• Regulatory Functions-
• It has framed rules and regulations and a code of conduct to regulate the
intermediaries such as brokers, underwriters, etc.
• It registers and regulates the working of all those who are associated with stock
exchange in any manner.
• It registers and regulates the working of mutual funds etc.
• It regulates takeover of the companies.
• It conducts inquiries and audit of stock exchanges.
Thank You

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CL MOD 2 PART 5.ppt

  • 1. Securities and Exchange Board of India A CRITICAL ANALYSIS
  • 2. A Brief History Prior to SEBI the security markets and stock exchange were regulated by several Acts, which were: • The Bombay Securities Contracts Control Act, 1925 • The Capital Issues (Control) Act, 1947 • The Securities Contracts (Regulation) Act, 1956 • Registrar of Companies (The Indian Companies Act, 1956) For a healthy growth of capital markets and to prevent malpractices in trading, the Government subsequently decided to “set up a separate board for the regulation and orderly functioning of Stock Exchange and the securities industry” 2
  • 3. Introduction • SEBI was established as a statutory authority through an Ordinance promulgated on 30.01.1992 by the President of India • SEBI is the regulator for the Securities Market in India • It is managed by a Board comprising of nine members including the chairman • Paradoxically this is a positive outcome of the Harshad Mehta Securities Scam of 1990-91 3
  • 4. SEBI - PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as "...to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto" 4
  • 5. Purpose and Role of SEBI • SEBI was set up with the main purpose of keeping a check on malpractices and protect the interest of investors. It was set up to meet the needs of three groups • Issuers: • For issuers it provides a market place in which they can raise finance fairly and easily • Investors: • For investors it provides protection and supply of accurate and correct information • Intermediaries: • For intermediaries it provides a competitive professional market 5
  • 6. Basic Objectives • To protect the interests of investors in securities • To promote the development of Securities Market • To regulate the securities market and • For matters connected therewith or incidental thereto MET-IOM 6
  • 7. Powers of SEBI • Powers relating to stock exchanges and intermediaries: • SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities • It can ask information from the stock exchanges and intermediaries regarding their business transactions for inspection/scrutiny and other purposes 7
  • 8. Powers of SEBI (Contd…) • Powers relating to monetary penalties: • SEBI’ has been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violations • It can even impose suspension of their registration for a short period 8
  • 9. Powers of SEBI (Contd…) • Powers to initiate actions relating to functions assigned: • SEBI has a power to initiate actions in regard to functions assigned • For example, it can issue guidelines to different intermediaries or can introduce specific rules for the protection of interests of investors
  • 10. Powers of SEBI (Contd…) • Powers under Securities Contracts (Regulation) Act : • For effective regulation of stock exchanges, the Ministry of Finance issued a Notification on 13 September, 1994 delegating several of its powers under the Securities Contracts (Regulation) Act to SEBI • SEBI is also empowered by the Finance Ministry to nominate three members on the Governing Body of stock exchange instead of earlier practice of government making such nominations
  • 11. Powers of SEBI (Contd…) • Powers to regulate business of stock exchanges : • SEBI is empowered to regulate the business of stock exchanges • It also includes regulation of intermediaries associated with the securities market as well as mutual funds, fraudulent and unfair trade practices relating to securities and regulation of acquisition of shares and takeovers of companies.
  • 12. Powers of SEBI (Contd…) • Powers relating to insider trading: • SEBI has power to regulate insider trading or can regulate the functions of merchant bankers
  • 13. Functions of SEBI • The SEBI performs functions to meet its objectives. • Functions can be broadly divided into: • Protective functions • Developmental functions • Regulatory functions
  • 14. Functions of SEBI (Contd…) • Protective Functions- • It Checks Price Rigging • It Prohibits Insider trading • SEBI prohibits fraudulent and Unfair Trade Practices • SEBI undertakes steps to educate investors • SEBI promotes fair practices and code of conduct in security market
  • 15. Functions of SEBI (Contd…) • Developmental Functions- • SEBI promotes training of intermediaries of the securities market. • SEBI tries to promote activities of stock exchange by adopting flexible and adoptable approach in following way: • SEBI has permitted internet trading through registered stock brokers. • SEBI has made underwriting optional to reduce the cost of issue. • Even initial public offer of primary market is permitted through stock exchange.
  • 16. Functions of SEBI (Contd…) • Regulatory Functions- • It has framed rules and regulations and a code of conduct to regulate the intermediaries such as brokers, underwriters, etc. • It registers and regulates the working of all those who are associated with stock exchange in any manner. • It registers and regulates the working of mutual funds etc. • It regulates takeover of the companies. • It conducts inquiries and audit of stock exchanges.