SINHGAD LAW COLLEGE

PUNE
A
PRESENTATION
ON

AN OVERVIEW OF
SEBI,
POWERS & FUNCTIONS
Presented by:
KHUSBOO KHARBANDA
BA.LLB(IV)Year
Roll N0- 91
Subject- Investment &
Securities
BACKGROUND:
Due to the rapid growth in the capital market in 1980s the general public
has shown a huge interest and participated. This was misused by various
people by way of malpractices like violation of rules and regulations of
stock exchanges and listing requirements, rigging of prices, investment
consultants, etc. This led to the suffering of the investors. As then there are
no proper penal provisions on such act the government was unable to
redress the grievance of the investors. This gave a leap for the formation of
the Securities and Exchange Board of India (SEBI).
It was first established in 1988 (originally formed in 1992) as a non-
statutory body for regulating the securities market. It became an
autonomous body on 12 April 1992 and was accorded statutory powers
with the passing of the SEBI Act 1992 by the Indian Parliament. Soon SEBI
was constituted as the regulator of capital markets in India under a
resolution of the Government of India. SEBI has its headquarters at the
business district of Bandra Kurla Complex in Mumbai.
INTRODUCTION:
• The Securities and Exchange Board of India (SEBI) is the regulator of
the securities and commodity market in India. Controller of Capital
Issues was the regulatory authority before SEBI came into existence; it
derived authority from the Capital Issues (Control) Act, 1947. In short,
it has been given necessary autonomy and authority to regulate and
develop an orderly securities market. SEBI serves as a watchdog for
the participants of the capital market. The aim of SEBI is to facilitate
the working of the security market smooth. SEBI’s duty is to check
and protect the investors’ interest from being curbed by malpractice.
SEBI has to be responsive to the needs of three groups, which
constitute the market:
1. Issuers of securities
2. Investors
3. Market intermediaries
 STRUCTURE OF SEBI:

The SEBI is managed by its members, which consists of the following:

1. The chairman is nominated by the Union Government of India.

2. Two members, i.e., Officers from the Union Finance Ministry.
3. One member from the Reserve Bank of India.
4. The remaining five members are nominated by the Union
Government of India, out of them at least three shall be whole-
time members.
 CURRENT ORGNISATION STRUCTURE:
• Mr.Ajay Tyagi was appointed as the chairman on 10 February 2017,
replacing Mr U K Sinha, and took charge of the chairman office on 1
March 2017. In February 2020, Mr.Ajay Tyagi's term as chairman of
SEBI was extended by another six months. The board comprises:

Name Designation
Ajay Tyagi Chairman
Gurumoorthy Mahalingam Whole time member
S.K Mohanty Whole time member
Ananta Barua Whole time member
Madhabi Puri Buch Whole time member
N S Vishwanathan Part-time member
Tarun Bajaj Part-time member
K V R Murty Part-time member
V Ravi Anshuman Part-time member
 POWERS OF SEBI:
•SEBI is a quasi-legislative and quasi-judicial body which can draft regulations,
conduct inquiries, pass rulings and impose penalties.
•It functions to fulfill the requirements of three categories –
• Issuers – By providing a marketplace in which the issuers can increase
their finance.
• Investors – By ensuring safety and supply of precise and accurate
information.
• Intermediaries – By enabling a competitive professional market for
intermediaries.
•By Securities Laws (Amendment) Act, 2014, SEBI is now able to regulate any
money pooling scheme worth Rs. 100 cr. or more and attach assets in cases of
non-compliance.
• SEBI Chairman has the authority to order "search and seizure operations".
SEBI board can also seek information, such as telephone call data records,
from any persons or entities in respect to any securities transaction being
investigated by it.
• To approve by−laws of Securities exchanges.
• to require the Securities exchange to amend their by−laws.
POWERS OF SEBI (CONT.)
• inspect the books of accounts and call for periodical returns from
recognised Securities exchanges.
• inspect the books of accounts of financial intermediaries.
• compel certain companies to list their shares in one or more
Securities exchanges.
• registration of Brokers and sub-brokers.
• SEBI perform the function of registration and regulation of the
working of venture capital funds and collective investment schemes
including mutual funds.
•It also works for promoting and regulating self-regulatory organizations
and prohibiting fraudulent and unfair trade practices relating to
securities markets.
SECURITIES APPELLATE TRIBUNAL:
The Securities Appellate Tribunal is a statutory body established
under the provisions of Section 15K of the Securities and Exchange
Board of India Act, 1992. The Civil Court jurisdiction is completely
bared. The purpose of the SAT is to:
• Hear and dispose of appeals against orders passed by the
Securities and Exchange Board of India or by an adjudicating
officer under the Act
• Exercise jurisdiction, powers and authority conferred on the
Tribunal by or under this Act or any other law for the time being
in force.
The Appeal from SAT will only be dealt with by the Supreme Court
but not any High court. Currently it is headed by Justice Tarun
Agarwala, former Chief Justice of the Meghalaya High Court. SEBI
has taken a very proactive role in streamlining disclosure
requirements to international standards.
CHECK AND BALANCE OF SEBI’S
POWERS:
Appeal before SAT
 Every order of SEBI is appealable to the SAT.

 Appeal to be made within 45 days of the date of receiving

the order.
 SAT can confirm, modify or set aside the order appealed
against.
 Endeavour to be made to dispose of the appeal within six
months. Appeal before the Supreme Court
 Appeal against the SAT’s order can be filed with the
Supreme Court.
 Appeal to be made within 60 days.

 Appeal only on any question of law.

FUNCTIONS OF SEBI:

Protective

Developmental

Regulatory
Protective Functions-
It checks price manipulation.
It bans Insider trading.
It prohibits unfair and fraudulent trade practices.
It promotes fair code of conduct in the security market It takes efforts to educate
the investors regarding ways to evaluate the investment options better.
Developmental Functions:
It facilitates the training of the intermediaries.
It aims at promoting activities of the stock exchange by having an adoptable and 
flexible approach.
Regulatory Functions:
It has designed a code of conduct, rules, and regulations to regulate the brokers,
underwriters, and other intermediaries.
SEBI also governs a company’s takeover. It regulates and registers the workings of
share transfer agents, stockbrokers, merchant bankers, trustees, and others who
are linked with the stock exchange.
It regulates and registers the mutual funds as well.
 It conducts audits and inquiries of stock exchanges.
SECURITIES MARKET:
Securities market is a component of the wider financial
market where securities can be bought and sold between subjects of
the economy, on the basis of demand and supply. Securities markets
encompasses stock markets, bond markets and derivatives markets
where prices can be determined.

Securities markets can be split into two levels: Primary markets, where new
securities are issued, and secondary markets where existing securities can be
bought and sold. Secondary markets can further be split into 
organised exchanges, such as stock exchanges and over-the-counter, where
individual parties come together and buy or sell securities directly. A securities
market is used in an economy to attract new capital, transfer real assets in
financial assets, determine prices which will balance demand and supply and
provide a means to invest money both short and long term.
INFORMAL GUIDANCE:
SEBI issued a scheme for Informal Guidance called “Securities and Exchange
Board of India (Informal Guidance) Scheme 2003”. The said scheme was of
contemporary importance as SEBI receives a number of requests from various
market participants for advance guidance on the interpretation of the
provisions of SEBI Act, Rules, Regulations, and Circulars. It was a “formal”
scheme launched by SEBI in the name of providing “informal guidance.”

The Scheme provides that SEBI would give informal guidance in two forms :-

 a) No action letter- In such a letter the concerned department of SEBI would indicate
that the said department may or may not recommend any action under any Act or
rules, regulations, guidelines, circulars or other legal provisions administered by SEBI.

 b) Interpretive letter- The other category of letters that could be issued by a

department of SEBI would provide an interpretation of a specific provision of any Act,
rules, regulations, guidelines, circulars, etc. administered by SEBI.
LANDMARK CASES:

 SATYAM SCAM,2003-
The Chairman of  Satyam Computer Services Limited (SCSL), Mr. 
Ramalinga Raju confessed to SEBI of the manipulation done by him in
the accounts of the Company. This corporate scandal was carried on
from 2003 till 2008. It is estimated that the fraud took place for around
Rs five thousand crores of cash balances as the company by falsifying
revenues, margins. He cooked the company’s book by overstating its
revenue, profit and profit margins for every single quarter over a
period of 5 years. The intention was to show a rosy picture of the
company to the investors, employees and analysts and to try and
convince them that the company was far bigger as an enterprise than it
actually was. To achieve this, the accountants generated fake invoices
to record sales that didn’t exist. Profit figures were also manipulated in
the same manner. On January 07, 2009, Raju sent his resignation to the
company’s board and confessed to a US $1.5 billion fraud.
 NSEL SCAM,2013-
National Spot Exchange Ltd (NSEL) is a company that was promoted by
Financial Technologies Indian Ltd and the NAFE. Two individuals
named Jignesh Shah and Shreekant Javalgekar were held guilty for this
scam. The Funds that were procured from the ignorant investors were
siphoned off. This is because most of the underlying commodities did
not have any existence at all. The transactions of commodities were
being carried out only on the paper. NSEL attracted the attention of
the retail investors by offering them fixed returns on paired contracts
in commodities. Around 300 brokers have been alleged roles in the
₹5,500-crore NSEL scam in 2013.
 Sahara India Real Estate Vs. SEBI, 2012
This case is about optional fully convertible debentures (OFCD) that
the two of Sahara Group’s unlisted companies – Sahara India Real
Estate and Sahara India Housing Investment – issued during 2008–
2011, collecting more than Rs. 24,000 Cr. from 30 million investors. A
convertible debenture entitles the holder to become a shareholder in
the company at a later stage, if he so chooses.
In 2011, SEBI ordered Sahara to refund this amount with interest to
the investors, as the issue was not in compliance with the
requirements applicable to the public offerings of securities. The
Company issued convertible debentures and secured Rs. 24,000 Cr.
from retail investors. Sahara Appeals in Supreme Court that SEBI has
no jurisdiction for the proposed issue. Supreme Court asks Sahara to
approach Securities Appellate Tribunal(SAT). SAT upholds SEBI orders.
Later, the case was heard in the Supreme Court where the SAT orders
were upheld and Subrata Rao was sent to jail.
ACHIEVEMENTS OF SEBI:
•Prime Minister Manmohan Singh in 2006 said that eternal vigilance is the
price of market stability and market growth. The regulator has kept the faith in
its 25-year journey that has seen it steadily gain more powers to oversee
India’s capital markets.
•It has ensured a well-functioning market and driven market development:
dematerialization of shares, shortening settlement cycles, initiating
nationwide electronic trading, introducing risk management systems,
establishing clearing corporations, nurturing the mutual fund industry and so
on.
•Rightly, the regulator has earned respect from domestic and global investors
for improving the efficacy of the market. After all, there have been no broker
defaults after 2001.
•Initiating the process of consultation papers before framing regulation has
also enhanced its credibility with stakeholders.
•Today, the Indian capital market can compares favorably with mature
markets.
•New initiatives for improving analytical capabilities, strengthening
surveillance & risk management and to promote research have been taken by
SEBI in recent years to counter the volatility in market.
CONCLUSION:
Since its establishment in 1992, a lot of initiatives have been
taken to protect the interests of the investors. Under the SEBI
Act, 1992 it has been empowered to frame subordinate
legislation and to investigate wrong doing, impose relevant
penalties and to conduct search and seizure operations. Thus ,it
has brought great reforms since its enactment.