The capital markets are forever thronging with activity. New investors are always coming in. Apart from protecting investor interest, establishing ground rules and guidelines serves as a safe way to trade in the commodities market. These are the fundamental reasons why we have SEBI, a government body dedicated to serving India’s capital market and securities landscape.
Who is SEBI?
The Securities and Exchange Board of India is a statutory regulatory body that monitors, regulates, and protects the capital markets, and the interest of investors. Coming under the jurisdiction of the Ministry of Finance, SEBI was established on the 12th of April 1992. They control securities exchanges in the country and also address complaints submitted by investors regarding security transfers, and non-payments of dividends from listed companies.
SEBI’s leadership team
SEBI is operated by its board of directors comprising a parliament-elected chairperson, 2 officers from the Ministry of Finance, GoI, 1 RBI (Reserve Bank of India) member, and 5 parliament elected members.
Objectives of SEBI
- SEBI’s main objective is to safeguard the interests of all parties partaking in stock trading activities.
- It upholds the rights of the average investor and ensures that malpractices within the stock market do not hamper or harm the investor’s privileges.
- It keeps devious entities in check within the stock market.
- It is tasked with enforcing a code of conduct within the stock market and is responsible for the smooth functioning of all trades and exchanges.
- SEBI also verifies information provided in the company prospectus to help reduce risk for retail investors.
Functions of SEBI
SEBI has certain powers which allows it to enforce compliance for both investors and companies within the stock market. The major functions of SEBI are divided into three categories namely,
- Protective functions
- Regulatory functions
- Development functions
The key tasks covered under SEBI’s functions include:
- Keeping insider trading at bay
- Preventing price rigging
- Nurturing fair trade practices
- Educating retail investors
- Offering training to stakeholders
- Onboarding registered brokers
- Ensuring compliance of the Demat format
- Maintaining ‘underwriting’ as an optional practise
- Applying discount brokerages
- Ensuring compliance of their code of conduct and trading guidelines
- Restricting private placements of financial intermediaries and bringing players under the regulatory wing
- Regulating mutual funds and company takeovers
- Conducting enquiries and audits of trades and exchanges
SEBI also verifies information provided in the company prospectus to help reduce risk for retail investors.
What’s in it for retail investors?
SEBI is India’s leading capital markets regulator. How they function and the powers they wield are important for any new investor in stock markets. Above everything else, SEBI was formed to safeguard public investors who may have limited knowledge about finances and the business environment. Understanding the role of SEBI is an important part of filling your knowledge gaps within the Indian investment arena.
With governmental authorities like SEBI in existence, malpractices are weeded out. However, it is the onus of every individual investor to become aware of and self-educate themselves before investing in stocks to protect your own money.