The major reforms undertaken in capital market of India includes:1.

Establishment of SEBI : The Securities and Exchange Board of India (SEBI) was established in 1988. It got a legal status in 1992. SEBI was primarily set up to regulate the activities of the merchant banks, to control the operations of mutual funds, to work as a promoter of the stock exchange activities and to act as a regulatory authority of new issue activities of companies. The SEBI was set up with the fundamental objective, "to protect the interest of investors in securities market and for matters connected therewith or incidental thereto." The main functions of SEBI are:i. To regulate the business of the stock market and other securities market. ii. To promote and regulate the self regulatory organizations. iii. To prohibit fraudulent and unfair trade practices in securities market. iv. To promote awareness among investors and training of intermediaries about safety of market. v. To prohibit insider trading in securities market. vi. To regulate huge acquisition of shares and takeover of companies. . Establishment of Creditors Rating Agencies : Three creditors rating agencies viz. The Credit Rating Information Services of India Limited (CRISIL - 1988), the Investment Information and Credit Rating Agency of India Limited (ICRA - 1991) and Credit Analysis and Research Limited (CARE) were set up in order to assess the financial health of different financial institutions and agencies related to

the stock market activities. It is a guide for the investors also in evaluating the risk of their investments. . Increasing of Merchant Banking Activities : Many Indian and foreign commercial banks have set up their merchant banking divisions in the last few years. These divisions provide financial services such as underwriting facilities, issue organising, consultancy services, etc. It has proved as a helping hand to factors related to the capital market. . Candid Performance of Indian Economy : In the last few years, Indian economy is growing at a good speed. It has attracted a huge inflow of Foreign Institutional Investments (FII). The massive entry of FIIs in the Indian capital market has given good appreciation for the Indian investors in recent times. Similarly many new companies are emerging on the horizon of the Indian capital market to raise capital for their expansions. . Rising Electronic Transactions : Due to technological development in the last few years. The physical transaction with more paper work is reduced. Now paperless transactions are increasing at a rapid rate. It saves money, time and energy of investors. Thus it has made investing safer and hassle free encouraging more people to join the capital market. . Growing Mutual Fund Industry : The growing of mutual funds in India has certainly helped the capital market to grow. Public sector banks, foreign banks, financial institutions and joint mutual funds between the Indian and foreign firms have launched many new funds. A big diversification in terms of schemes, maturity, etc. has taken place in mutual funds in India. It has given a wide choice for the common investors to enter the capital market. . Growing Stock Exchanges : The numbers of various Stock Exchanges in India are increasing. Initially the BSE was the main exchange, but now after the setting up of theNSE and the OTCEI, stock exchanges have spread across the country.

Recently a new Inter-connected Stock Exchange of India has joined the existing stock exchanges. . Investor's Protection : Under the purview of the SEBI the Central Government of India has set up the Investors Education and Protection Fund (IEPF) in 2001. It works in educating and guiding investors. It tries to protect the interest of the small investors from frauds and malpractices in the capital market. . Growth of Derivative Transactions : Since June 2000, the NSE has introduced the derivatives trading in the equities. In November 2001 it also introduced the future and options transactions. These innovative products have given variety for the investment leading to the expansion of the capital market. . Insurance Sector Reforms : Indian insurance sector has also witnessed massive reforms in last few years. The Insurance Regulatory and Development Authority (IRDA) was set up in 2000. It paved the entry of the private insurance firms in India. As many insurance companies invest their money in the capital market, it has expanded. . Commodity Trading : Along with the trading of ordinary securities, the trading in commodities is also recently encouraged. The Multi Commodity Exchange (MCX) is set up. The volume of such transactions is growing at a splendid rate. Apart from these reforms the setting up of Clearing Corporation of India Limited (CCIL), Venture Funds, etc., have resulted into the tremendous growth of Indian capital

Role Functions of SEBI in Monitoring the Stock Exchange

Post : Gaurav Akrani Date : 11/01/2010 02:57:00 PM IST No Comments Labels : Economics

What is SEBI?
Securities and Exchange Board of India (SEBI) is an apex body for overall development and regulation of the securities market. It was set up on April 12, 1988. To start with, SEBI was set up as a non-statutory body. Later on it became a statutory body under the Securities Exchange Board of India Act, 1992. The Act entrusted SEBI with comprehensive powers over practically all the aspects of capital market operations.

Picture of SEBI Bhavan in Mumbai. Image Credits Paul Noronha.

Role Functions of SEBI

The role or functions of SEBI are discussed below. 1. To protect the interests of investors through proper education and guidance as regards their

investment in securities. For this, SEBI has made rules and regulation to be followed by the financial intermediaries such as brokers, etc. SEBI looks after the complaints received from investors for fair settlement. It also issues booklets for the guidance and protection of small investors. 2. To regulate and control the business on stock exchanges and other security markets. For this, SEBI

keeps supervision on brokers. Registration of brokers and sub-brokers is made compulsory and they are expected to follow certain rules and regulations. Effective control is also maintained by SEBI on the working of stock exchanges. 3. To make registration and to regulate the functioning of intermediaries such as stock brokers, sub-

brokers, share transfer agents, merchant bankers and other intermediaries operating on the securities market. In addition, to provide suitable training to intermediaries. This function is useful for healthy atmosphere on the stock exchange and for the protection of small investors.

4.

To register and regulate the working of mutual funds including UTI (Unit Trust of India). SEBI has

made rules and regulations to be followed by mutual funds. The purpose is to maintain effective supervision on their operations & avoid their unfair and anti-investor activities. 5. To promote self-regulatory organization of intermediaries. SEBI is given wide statutory powers.

However, self-regulation is better than external regulation. Here, the function of SEBI is to encourage intermediaries to form their professional associations and control undesirable activities of their members. SEBI can also use its powers when required for protection of small investors. 6. To regulate mergers, takeovers and acquisitions of companies in order to protect the interest of

investors. For this, SEBI has issued suitable guidelines so that such mergers and takeovers will not be at the cost of small investors. 7. To prohibit fraudulent and unfair practices of intermediaries operating on securities markets. SEBI is

not for interfering in the normal working of these intermediaries. Its function is to regulate and control their objectional practices which may harm the investors and healthy growth of capital market. 8. To issue guidelines to companies regarding capital issues. Separate guidelines are prepared for first

public issue of new companies, for public issue by existing listed companies and for first public issue by existing private companies. SEBI is expected to conduct research and publish information useful to all market players (i.e. all buyers and sellers). 9. To conduct inspection, inquiries & audits of stock exchanges, intermediaries and self-regulating

organizations and to take suitable remedial measures wherever necessary. This function is undertaken for orderly working of stock exchanges & intermediaries. 10. To restrict insider trading activity through suitable measures. This function is useful for avoiding

undesirable activities of brokers and securities scam

Capital markets in India have considerable depth. There are 22 stock exchanges in India. Ahmedabad, Delhi, Calcutta, Madras and Bangalore are major ones amongst the other stock exchanges. These stock exchanges are served by 3,000 brokers and 20,000 sub-brokers. A number of providers for merchant banking services exist. The market capitalization of the Bombay Stock Exchange (BSE) alone was around Rs.5 trillion in December 1994.This makes it one of the largest emerging stock markets in the world. A number of other cities also have stock markets. There are two other exchanges in Bombay :

National Stock Exchange (NSE) Over The Counter Exchange of India (OTCEI)

The regulatory agency which oversees the functioning of stock markets is the Securities and Exchange Board of India (SEBI), which is also located in Bombay. India has one of the most active primary markets in the world, with roughly 130 public issues taking place each month. The National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and OTCEI have already introduced screen-based trading. All other exchanges (except Guwahati, Magadh and Bhubaneshwar) are to introduce full computerisation and screen-based trading by 30 June 1996.

This will bring about greater transparency for investors, reduce spreads, allow for more effective monitoring of prices and volumes and speed