Securities and Exchange Board of India (SEBI) : MGT 333 (Basic Financial Management)

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Securities and Exchange Board of India(SEBI)
SACHIN RAJ
A34
10902778
GROUP-A
D3901
BCA-MCA
MGT 333
(BASIC FINANCIAL MANAGEMENT)
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 Chairman is CB Bhave
 Headquartered in Mumbai
Securities and Exchange Board of India

(SEBI) was first established in the year 1988
as a non-statutory body for regulating the
securities market. It became an autonomous
Abstract of SEBI
The Securities and Exchange Board of
body in 1992 and more powers were given
India (frequently abbreviated SEBI) is the
through an ordinance. Since then it regulates
regulator for the securities market in India. It
the market through its independent powers
was formed officially by the Government of
set up by Government of India in 1988, it
India in 1992 with SEBI Act 1992 being
acquired statutory form in 1992 with SEBI
passed by the Indian Parliament. Chaired by
Act 1992 Functions and Responsibilities.
C B Bhave, SEBI is headquartered in the
popular business district of Bandra-Kurla SEBI has to be responsive to the
complex in Mumbai, and has Northern, needs of three groups,which
Eastern, Southern and Western regional constitute the market:
offices in New Delhi, Kolkata, Chennai and
Ahmedabad. The issuers of securities
The investors
The market intermediaries.
History, role, function of sebi
HISTORY SEBI has three functions rolled into one
body quasi-legislative, quasi-judicial and
 Set up originally in 1988 by Govt. of quasi-executive. It drafts regulations in its
India legislative capacity, it conducts investigation
and enforcement action in its executive
 Acquired statutory form in 1992 function and it passes rulings and orders in
underSEBI its judicial capacity. Though this makes it
very powerful, there is an appeals process to
 Act 1992
create accountability. There is a presently headed by a former Chief

Securities Appellate Tribunal which Justice of a High court - Mr. Justice
is a three member tribunal and is NK Sodhi. A second appeal lies
directly to the Supreme Court.
History and Role of SEBI in mutual There is no distinction in regulatory

funds in India requirements for these mutual funds and all
are subject to monitoring and inspections by
Unit Trust of India was the first mutual fund SEBI. The risks associated with the schemes
set up in India in the year 1963. In early launched by the mutual funds sponsored by
1990s, Government allowed public sector these entities are of similar type. It may be
banks and institutions to set up mutual mentioned here that Unit Trust of India
funds. (UTI) is not registered with SEBI as a
In the year 1992, Securities and exchange mutual fund (as on January 15, 2002).
Board of India (SEBI) Act was passed. The
objectives of SEBI are – to protect the The basic objectives of the Board
interest of investors in securities and to were identified as:
promote the development of and to regulate
the securities market.  to protect the interests of investors in
As far as mutual funds are concerned, SEBI securities;
formulates policies and regulates the mutual
 to promote the development of
funds to protect the interest of the investors.
Securities Market;
SEBI notified regulations for the mutual
funds in 1993. Thereafter, mutual funds  to regulate the securities market and
sponsored by private sector entities were
allowed to enter the capital market. The  for matters connected therewith or
regulations were fully revised in 1996 and incidental thereto.
have been amended thereafter from time to
time. SEBI has also issued guidelines to the
As an important entity in the
mutual funds from time to time to protect market it works with following
the interests of investors. objectives:
All mutual funds whether promoted by
public sector or private sector entities 1. It tries to develop the securities market.
including those promoted by foreign entities 2. Promotes Investors Interest.
are governed by the same set of Regulations.
3. Makes rules and regulations for the the fulfillment of its objectives with
securities market commendable zeal and dexterity. The
improvements in the securities markets like
capitalization requirements, margining,
Since its inception SEBI has been working establishment of clearing corporations etc
targetting the securities and is attending to
SEBI has introduced the comprehensive identification and risk management systems
regulatory measures, prescribed registration for Clearing houses of stock exchanges,
norms, the eligibility criteria, the code of surveillance system etc. which has made
obligations and the code of conduct for dealing in securities both safe and
different intermediaries like, bankers to transparent to the end investorAnother
issue, merchant bankers, brokers and sub- significant event is the approval of trading in
brokers, registrars, portfolio managers, stock indices (like S&P CNX Nifty &
credit rating agencies, underwriters and Sensex) in 2000.
others. It has framed bye-laws, risk
INTRODUCTION Two broad approaches of SEBI is to

integrate the securities market at the national
A market Index is a convenient and level, and also to diversify the trading
products, so that there is an increase in
effective product because of the number of traders including banks, financial
following reasons: institutions, insurance companies, mutual
funds, primary dealers etc. to transact
 It acts as a barometer for market through the Exchanges. In this context the
behavior; introduction of derivatives trading through
 It is used to benchmark portfolio Indian Stock Exchanges permitted by SEBI
performance; in 2000 AD is a real landmark.
 It is used in derivative instruments
like index futures and index options; SEBI appointed the L. C. Gupta
Committee in 1998 to recommend the
 It can be used for passive fund
regulatory framework for derivatives trading
management as in case of Index
Funds.
and suggest bye-laws for Regulation and

Control of Trading and Settlement of
Derivatives Contracts. The Board of SEBI in
its meeting held on May 11, 1998 accepted Stock Index Futures Market. The report was
the recommendations of the committee and submitted in november 1998.
approved the phased introduction of
derivatives trading in India beginning with However the Securities Contracts
Stock Index Futures. The Board also (Regulation) Act, 1956 (SCRA) required
approved the "Suggestive Bye-laws" as amendment to include "derivatives" in the
recommended by the Dr LC Gupta definition of securities to enable SEBI to
Committee for Regulation and Control of introduce trading in derivatives. The
Trading and Settlement of Derivatives necessary amendment was then carried out
Contracts. by the Government in 1999. The Securities
Laws (Amendment) Bill, 1999 was
SEBI then appointed the J. R. Verma introduced. In December 1999 the new
Committee to recommend Risk framework was approved.
Containment Measures (RCM) in the Indian
Derivatives have been accorded the status of necessary regulations/bye-laws and

`Securities'. The ban imposed on trading in intimated the Stock Exchanges in the year
derivatives in 1969 under a notification 2000. The derivative trading started in India
issued by the Central Government was at NSE in 2000 and BSE started trading in
revoked. Thereafter SEBI formulated the the year 2001.
As an important entity in the market it

works with following objectives:
1. It tries to develop the securities market.
2. Promotes Investors Interest.
3. Makes rules and regulations for the

securities market.
Important Objectives of SEBI:
3. Checks the malpractices in securities

market.
4. It enhances investor's knowledge on

market by providing education.
5. It regulates the stockbrokers and sub-

brokers.
6. To promote Research and Investigation
Functions Of SEBI:
1. Regulates Capital Market
2. Checks Trading of securities.
SEBI from time to time have adopted many

rules and regulations for enhancing the
Indian capital market. The recent initiatives
undertaken are as follows:
Sole Control on Brokers:
Under this rule every brokers and sub

SEBI In India's Capital Market: brokers have to get registration with SEBI
and any stock exchange in India.
For Underwriters: For Mutual Funds
For working as an underwriter an asset limit SEBI's introduction of SEBI (Mutual

of 20 lakhs has been fixed. Funds) Regulation in 1993 is to have direct
control on all mutual funds of both public
For Share Prices and private sector.
According to this law all Indian companies
are free to determine their respective share
prices and premiums on the share prices.
 Registering and regulating the

working of stockbrokers and other
Role of SEBI in Capital Market intermediaries associatedwith the
securities market.
 SEBI’s Principal Tasks
 To regulate the business in Stock  Registering and regulating the
Exchage &other Securities working ofcollective investment
Market.
schemes includingmutual funds.
 To register & regulate the
working of Capitalmarket  Promoting and regulating the self-
intermediaries.
regulateryorganizations.
 To register & regulate the
working of MutualFunds.  Prohibiting fraudulent and unfair
 To promote & regulate Self- trade practices relating to securities
regulatoryOrganization
market.
Purpose and Aims of SEBI  Promoting investors’ education and

training ofintermediaries of
 Regulating the business in the stock
securities market.
market andother securities market.
 Prohibiting insider trading in
securities.
Other Functions of SEBI  monetary penalties, on erring market

intermediaries.
 The regulation of the capital markets
is primarily the responsibility of the  Regulating substantial acquisition of
Securities and Exchange Board of shares and takeover of
India (SEBI),which is located in
 companies.
Mumbai. Some of the major
functions of SEBI are:  Calling for information from,
carrying out inspection,
 SEBI is expected to regulate the
business in stock exchanges and any  conducting inquiries and audits of
the stock exchanges and
 other securities markets.
 intermediaries and self regulatory
 Registering and regulating the
organizations in the securities
working of collective investment
schemes,  market.
 including mutual funds is a  To promote investor's education and
responsibility of SEBI. training of intermediaries
 SEBI is responsible for prohibiting  of securities markets.
fraudulent and unfair trade practices
Prohibiting insider trading in  Prohibit Fraudulent and Unfair Trade
securities, with the imposition of Practices
connected Stock Exchange ware added to

this list of exchange not to be inspected.
FUNCTIONS OF SEBI IN During these inspections, a review of the
RESPECT OF MATTERS market operations, organisational structure
SPECIFIED IN SECTION 11 OF and administrative control of the exchange is
made to ascertain whether :
THE SECURITIES AND
EXCHANGE BOARD OF INDIA  The exchange provides a fair,
ACT, 1992 equitable and growing market to
investors
A)
 The exchange’s organisation,
REGULATION OF BUSINESS IN THE systems and practices are in
STOCK EXCHANGES accordance with the Securities
The SEBI has been inspecting all the stock  Contracts (Regulation) Act (SC(R)
exchanges once every year since 1995-96 Act), 1956 and rules framed
under the thereunder
SEBI Act, 1992. However, in view of the  The exchange has implemented the
low/insignificant turnover recorded at the directions, guidelines and
OTCEI, instructions issued by the SEBI
Saurashtra-Kutch, Madhya Pradesh, Jaipur,  from time to time
Mangalore, Magadh, Bhubaneswar and
Gauhati Stock Exchanges, these exchanges  The exchange has complied with the
were not inspected during 1999-2000. In the conditions, if any, imposed on it at
year 2000-2001 four more exchanges viz. the time of renewal
Madras, Vadodara, Coimbatore and Inter-
 Grant of its recognition under section
4 of the SC(R) Act, 1956.
Based on the observations/suggestions made and public representatives on the governing

in the inspection reports, the exchanges are board/council of management of the stock
advised to send a compliance report to the exchanges also pursue the matters in the
SEBI within one month of the receipt of the meetings of the governing board/council of
inspection report by the exchange and management. If the performance of the
thereafter quarterly reports indicating the exchanges whose renewal of recognition is
progress made by them in implementing the due, is not found satisfactory,
suggestions contained in the inspection
report. The SEBI nominee directors
SEBI grants further recognition for a short a Monthly Development Report which the
period only, subject to fulfillment of certain exchanges are required to submit to the
conditions. Further, the functioning of the SEBI every month.
exchanges are also being monitored through
B)
REGISTRATION AND REGULATION The number of underwriters registered with

OF THE WORKING OF SEBI in terms of SEBI (Underwriters) Rules
INTERMEDIARIES and Regulations, 1993 as on March 31, 2001
was 57 during the year. 19 underwriters
Primary Market
were grantedfresh registration during the
Merchant bankers year 2000-01.
As on March 31, 2001, there were 162 Portfolio managers

Category I Merchant Bankers registered
The number of Portfolio Managers
with SEBI. 16 Merchant Bankers were given
registered as on March 31, 2001 was 39.
fresh registration during the year 2000-01.
During the year 2000-01, 16 Portfolio
Underwriters Managers were granted fresh registration.
Secondary Market
Stock brokers
Stock brokers services form integral part of year under review, 919 new brokers were
stocks market expansion and growth which registered and 329 registrations were de-
is an indication of deepening of the market. registered due to cancellation or
The year of 2000-01 has again witnessed surrendered. As a result total number of
large expansion in the number of brokers as registered brokers increased from 9,192 as
observed during the previous year. During on March 31, 2000 to 9,782 as on March 31,
the current financial 2001.
C)
REGISTRATION AND REGULATION

OF MUTUAL FUNDS
UTI which is not registered with SEBI)
Registration of mutual funds operating in India as on March 31, 2001.
Though UTI is not registered with SEBI,
During the year, registration was granted to there is an arrangement of voluntary
one new mutual fund in the private sector compliance of regulations by the UTI for the
viz. HDFC Mutual Fund. With the schemes launched after July 1, 1994.
registration of the above mutual fund, there Subsequently, UTI has brought some more
are a total of 39 mutual funds, (including schemes launched before July 1994 under
the voluntary compliance arrangement.
D) fraudulent and unfair trade practicesvigorous

efforts were undertaken to unearth these
FRAUDULENT AND UNFAIR TRADE
PRACTICES
After enacting the SEBI (Prohibition of manipulations and practices and take action
Fraudulent and Unfair Trade Practices against the manipulators/violators. During
relating to the securities market) 2000- 2001, 47 cases were taken up for
Regulations, which enabled SEBI to alleged market manipulation and price
investigate into market manipulations and rigging; 5 cases weretaken up for alleged
“issue” related manipulation, etc
E)
PROHIBITION OF INSIDER TRADING to successful investigations in one case. On

full working of the Stock Watch System,
During 2000-2001, 6 new cases were taken which has been put in place, surveillance
up. Inquiries/Investigations were completed over insider trading would be further
in fourcases of insider trading in this year. strengthened.
Show cause notices have been issued to the
insiders pursuant
F)
SUBSTANTIAL ACQUISITION OF
SHARES AND TAKE-OVERS
and Take-overs) Regulations, 1997.
SEBI has taken up one case of alleged Inquiries/Investigations were completed in
violation of the SEBI (Substantial three other cases and pursuant to
Acquisition of Shares investigations, adjudication proceedings
have been initiated in one cases and further
proceedings under the regulations are in
progress.
Future Challenges of sebi
 Speculative Trading & Distribution of Turnover.
 Market Abuses
Conclusion The Securities and Exchange Board of

India (frequently abbreviated SEBI) is the
regulator for the securities market in India. It
was formed officially by the Government of  Registering and regulating the

India in 1992 with SEBI Act 1992 being working of collective investment
passed by the Indian Parliament. schemes,
 Regulating the business in the stock  including mutual funds is a

market andother securities market. responsibility of SEBI.
 Registering and regulating the  SEBI is responsible for prohibiting

working of stockbrokers and other fraudulent and unfair trade practices
intermediaries associatedwith the Prohibiting insider trading in
securities market. securities, with the imposition of
 Registering and regulating the  monetary penalties, on erring market

working ofcollective investment intermediaries.
schemes includingmutual funds.
 Regulating substantial acquisition of
 Promoting and regulating the self- shares and takeover of
regulateryorganizations.
 companies.
 Prohibiting fraudulent and unfair
trade practices relating to securities  Calling for information from,
market. carrying out inspection,
 Promoting investors’ education and  conducting inquiries and audits of

training ofintermediaries of the stock exchanges and
securities market.
 intermediaries and self regulatory
 Prohibiting insider trading in organizations in the securities
securities.
 market.
 other securities markets.
 To promote investor's education and
training of intermediaries
 of securities markets.
 Prohibit Fraudulent and Unfair Trade

Practices
REFRENCES
• http://in.answers.yahoo.com/question/index?qid=20081117080937AArbJgh
• http://allmutualfund.blog.co.in/2008/03/31/history-and-role-of-sebi-in-mutual-
funds-in-india/
• http://finance.indiamart.com/india_business_information/sebi_introduction.ht
ml
• http://www.economywatch.com/financial-regulatory-body/securities-and-
exchange-board-of-india.html
• http://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India

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