Market Regulator - SEBI

SEBI

•Objectives
•Organization Structure
•Functions
•Powers
•Legal Framework of SEBI
•Role of SEBI in Investor Protection
 INTRODUCTION
• SEBI was established in the year 1988 and given statutory
powers in 1992 with SEBI Act 1992 being passed by the Indian
Parliament.
• SEBI has it's Headquarter at the business district of Bandra Kurla
Complex in Mumbai, and has Northern, Eastern, Southern and
Western Regional Offices in New Delhi, Kolkata, Chennai and
Ahmedabad respectively.
• Controller of Capital Issues was the regulatory authority before
SEBI came into existence; it derived authority from the Capital Issues
(Control) Act, 1947.
 OBEJECTIVES
1. To protect the interest of investors and ensure safety of
their investments
2. To promote the development of securities market –
Investor education

3. To prevent fraudulent and unfair trade practices

4. To regulate and develop a code of conduct for
intermediaries such as brokers, underwriters, merchant
bankers

5. To regulate the securities market

 MANAGEMENT
The Board of SEBI consists of following:
a) The chairman who is nominated by Union Government of India.
b) One member from The officials of Reserve Bank of India.
c) Two members, i.e. Officers from Union Finance Ministry.
d) Five other members of whom at least three shall be the whole-
time members appointed by the central Government.
The chairman and other members of the board are chosen from
amongst the persons of ability, integrity and standing who have shown
capacity in dealing with problems relating to securities market which in
the opinion of central government, shall be useful to board
 DEPARTMENTS OF SEBI
1. Market Intermediaries Regulation and
Supervision Department (MIRSD)

2. Market Regulation Department (MRD)

3. Derivatives and New Products Department (DNDP)
4. Corporation Finance Department (CFD)
5. Investment Management Department (IMD)
6. Integrated Surveillance Department (ISD)
7. Investigations department (IVD)
8. Enforcement department (EFD)
9. Legal Affairs Department (LAD)
 Cont…
10. Enquiries and Adjudication Department (EAD)
11. Office of Investor Assistance and Education (OIAD)
12. General Services Department (GSD)
13. Department of economic and policy analysis (DEPA)
14. Office of the chairman (OCH)
15. Information technology department
16. The regional offices (RO's)
 FUNCTIONS

1. Regulatory Function

2. Developmental Function

3. Protective Function
 1.REGULATORY FUNCTION

• Regulating the business in stock exchange

• Registration and regulating the working of Stock Brokers,
Sub – Brokers, Merchant Bankers, Depository participants and
other intermediaries

• Regulation of Collective Investment Schemes

• Prohibition of Unfair Trade Practices and Insider Trading
• Regulating substantial acquisition of shares and takeover
of companies

• Conducting Inquires and Audits of the stock exchanges and

others associated with securities market
 2. DEVELOPMENT FUNCTIONS

• Promote investor’s education to increase participation

in capital market
• Training of intermediaries such as brokers and sub-brokers
• Conducting research and publishing market
information which are useful to all market
participants
• Promoting self regulatory organizations
 3.PROTECTIVE FUNCTIONS
a) Controlling Price Rigging - The practice of inflating the price of
stocks, or enhancing their quoted value, by a system of pretended
purchases, creating an unusual demand for such stocks
b) Prohibition of Insider Trading - The employees or executives who
have access to the strategic information about the company, use
the same for trading in the company's stocks or securities, it is called
insider trading and is highly discouraged by the SEBI
c) Prohibition of fraudulent and Unfair Trade Practices
d) SEBI promotes fair practices and code of conduct
 Penalty for Insider Trading and fraudulent and
unfair trade practices - Twenty-five crore rupees or
three times the amount of profits made, whichever
is higher
 Powers of SEBI
For the discharge of its functions efficiently, SEBI has been vested
with the following powers:

• Power of Civil Court

• Powers to suspend trading of any security in the recognised stock exchange

• Power to restrain persons from accessing the securities market

• Powers to regulate or prohibit issue of prospectus, offer
document or advertisement soliciting money for issue of
securities

• To approve by−laws of stock exchanges

• To require the stock exchange to amend their by−laws.

• Power to investigate
 Cont…
• Inspect the books of accounts and call for periodical returns
from recognized stock exchanges.

• Inspect the books of accounts of intermediaries

• Power to cancel certificate
• Power to impose penalties and adjudication
• Power to make regulations
• Power to prohibit the manipulative and deceptive devices,
Insider trading and substantial acquisition of securities or
control
 Legal Framework of SEBI

• SEBI Act 1992

• The Securities Contract (Regulation) Act 1956

• Securities Contract (Regulation) Rules 1957

• Depositories Act, 1996 [As amended by
the Securities Laws(Amendment) Act,
2014]
 SEBI Act 1992

• Establishment, Incorporation and Management of SEBI

• The Powers and Functions of SEBI

• Provisions relating to collective investment schemes

• Registration of an Intermediary

• Penalties

• Dispute Mechanism
The Securities Contract (Regulation) Act 1956

• Recognition of stock exchanges

• Framing of stock exchange rules
• Superceding a stock exchange
• Preventing unauthorized stock exchanges
• Prohibition of contracts outside a stock exchange
• Appeal to the securities appellate tribunal against refusal
of a
stock exchange to list the securities of a public
company
 Securities Contract (Regulation) Rules 1957

• Qualification to be a member of a recognised

stock exchange

• SEBI nominees for governing body of stock exchange

• Accounting Procedures
• Requirements for listing securities on a
recognised stock exchange
 Depositories Act, 1996

• The registration of Depositories

• The registration of Depository Participants
• Process of surrendering certificates of securities
• Procedure for dematerialization, creation, pledge and
hypothecation
securities
 Investor Protection
An investor enjoys investing, if
• He knows how to invest
• He has full knowledge of the market
• The market is safe and there are no malpractices;
• There are arrangements for redressal in case of
grievances. Accordingly, SEBI's investor protection
strategy has four elements.
 1. Investor Education and Awareness
• Build the capacity of investors through education and awareness
to enable an investor to take informed investment decisions.
• SEBI has been organizing investor education and
awareness workshops directly
• It maintains an updated, comprehensive web site for education
of investors.

• It publishes various kinds of cautions through media.

• It responds to the queries of investors through telephone, e-
mails, letters, and in person for those who visit SEBI office.
 2.SEBI has adopted disclosure based
regulatory regime
• Under this framework, issuers and intermediaries
disclose relevant details about themselves, the
products, the market
and the regulations so that the investor can take
informed investment decisions based on such
disclosures.
• SEBI has prescribed and monitors various initial
and continuous disclosures.
• Make available every detail relevant for investment
in public domain.
 3. Ensure that the market has systems
and practices which make
transactions safe

SEBI has taken various measures such as:

• Screen based trading system
• Dematerialization of securities
• T+2 rolling settlement
• Regulate intermediaries, issue and trading of securities,
corporate restructuring, etc.

• It also ensures that only the fit and proper persons are
allowed to operate in the market
 4.Facilitate redressal of investor grievances

• SEBI has a comprehensive mechanism to facilitate redressal of

investor grievances against intermediaries and listed companies.

• It follows up with the companies and intermediaries who do not

redress investors' grievances, by sending reminders to them and
having meetings with them.

• It takes appropriate enforcement actions as provided under the law

• The stock exchanges have investor protection funds to

compensate investors when a broker is declared a
defaulter.
• Depository indemnifies investors for loss due to negligence of
depository or depository participant.
 Cont..
• To facilitate replies to various queries of the general
public on matters relating to securities market, SEBI
has undertaken a new initiative and launched toll free
helpline service number 1800 266 7575 or 1800 22
7575
• SCORES – SEBI Complaints Redress System
facilitates investors to lodge their complaint online
with SEBI and subsequently view its status.
 References
• http://www.sebi.com/
• http://investor.sebi.gov.in/
• http://www.sebi.gov.in/cms/sebi_data/comm
ondocs/TollFreeHelpLine_h.html
• http://www.nism.ac.in/
• http://scores.gov.in/