What is SEBI? SEBI is the regulator for the security Market in India. In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution.
Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-statutory body for regulating the securities market and was subsequently upgraded as a fully autonomous body on April 12, 1992 the Securities and Exchange Board Of India was constituted. It was constituted in accordance with the provisions of the Securities and Exchange Board Of India Act 1992.Chaired by C B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennaiand Ahmedabad. PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “….. to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto” Securities and Exchange Board of India (SEBI), Functions of SEBISEBI has to be responsive to the needs of three groups, which constitute the market: ? the issuers of securities ? the investors ? the market intermediaries. SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-executive.
It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeals process to create accountability.There is a Securities Appellate Tribunal which is a hree-member tribunal and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the Supreme Court. SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e. g.
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the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as required under law. SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam fiasco.  It had[when? increased the extent and quantity of disclosures to be made by Indian corporate promoters. More recently, in light of the global meltdown,it liberalised the takeover code to facilitate investments by removing regulatory strictures. In one such move, SEBI has increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present.  The Board is responsible for the securing the interests of investors in securities and to facilitate the growth of and to monitor the securitiesmarket in an appropriate manner.
To monitor and control the performance of stock exchange and derivative markets.Listing and monitoring the functioning of stock brokers, sub brokers, share transfer agents, bankers to an issue, trustees of trustdeeds, registrars to an issue, merchant bankers, underwriters, portfolio managers,investment advisers and others associated with securities markets by any means. Monitoring and Controlling the functioning of venture capital funds and mutualfunds. Forbid unjust and dishonest trade practices in the security markets andforbid insider trading in the security market. Undertake periodic audits of stock exchanges, mutual funds, individuals and self regulatory organizations associated with the security market.Functions: 1. REGULATION OF STOCK EXCHANGES AND SUBSIDIARIES One of the key functions of the Board is to supervise and monitor the activities of the exchanges, clearing houses and the settlement system, strengthen market infrastructure and ensure that appropriate risk management systems are in place.
I. Inspection of Stock Exchanges: On-site supervision through inspection of stock exchanges is considered an effective regulatory tool. Under the policy of risk-based supervision which has been adopted from the year under review, stock exchanges having a significant turnover were taken up for onsite inspection.These were The Bombay Stock Exchange (BSE), Calcutta Stock Exchange (CSE), National Stock Exchange (NSE), Inter Connected Stock Exchange (ISE), Ludhiana Stock Exchange (LSE), Hyderabad Stock Exchange (HSE) and Ahmedabad Stock Exchange (ASE). II. Inspection of Subsidiaries of Stock Exchanges III. Restructuring of Management of Subsidiaries: The inspection of the subsidiaries of stock exchanges revealed deficiencies in their functioning and risk management systems The management structure of the subsidiaries needed to undergo change in order to enable them to be able to provide a safe and ransparent market and effectively discharge their responsibilities towards investor protection.
IV. Illegal Trading in Securities It had come to the notice of the SEBI that certain persons were engaging in trading in securities outside the purview of the stock exchanges (‘illegal trading in securities’). 2. REGISTRATION AND REGULATION OF THE WORKING OF INTERMEDIARIES In order to interpose between issuers and investors, regulators recognize various classes of intermediaries in the capital market. Regulation through intermediaries has been found, perhaps more effective in certain spheres of activity. SEBI, over the period, ecognized many types of capital market intermediaries in India and operations during the year is reviewed in the following sections. I.
Primary Market Intermediaries such as merchant bankers, underwriters, debenture trustees, bankers to an issue, registrars to an issue and share transfer agents and portfolio manager are regulated by SEBI II. Secondary Market Brokers are one of the most important links between the investors and the market. Their association with the stock exchanges and investors dates back to as early as nineteenth century III. Registration of FIIs During the year 49 FIIs were granted fresh egistration whereas 34 FIIs were granted renewal of registration. 163 sub-accounts got registered and the registration of 71 subaccounts were renewed. IV. Registration of Custodian of Securities 3.
REGISTRATION AND REGULATION OF COLLECTIVE INVESTMENT SCHEMES INCLUDING MUTUAL FUNDS AND VENTURE CAPITAL FUNDS. 4. PROMOTION AND REGULATION OF SELF REGULATORY ORGANISATIONS SUCH AS STOCK EXCHANGES. 5. PROPER CHECK ON FRAUDULENT AND UNFAIR TRADE PRACTICES 6. INVESTOR EDUCATION AND THE TRAINING OF INTERMEDIARIES 7. PROHIBITION OF INSIDER TRADING 8.
SUBSTANTIAL ACQUISITION OF SHARES AND TAKE-OVERS 9. INSPECTION AND INQUIRIES 0. DELEGATED POWERS AND FUNCTIONS 11. FEES AND OTHER CHARGES 12. RESEARCH AND INTERNATIONAL RELATIONS Some Leading Scams in India: Some Leading Scams in India Securities Scam – Harshad Mehta (1991-92)Floating Companies Scam – C R Bhansali (1992-96) UTI Scam – Unit 64 – Bailout Package of 3,500-4,000 Crores Home Trade – Sanjay Agarwal (2000) – Around 300 Crores Scam Securities Scam – Ketan Parekh – Rs 1,500 Crores FakeStamp Fraud – Abdul Karim Telgi - Around 30,000 Crores DSQ Software – Dinesh Dalmiya (2001) - Around 600 Crores IPO Scam – Karvy, Indiabulls(2004-05) Satyam – Ramalinga Raju (2009) – Around 12,000 Crores.Organization structure Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market Regulator. Prior to taking charge as Chairman SEBI, he had been the chairman of NSDL (National Securities Depository Limited) ushering in paperless securities.
Prior to his stint at NSDL, he had served SEBI as a Senior Executive Director. He is a former Indian Administrative Service officer of the 1975 batch. The Board comprises Name |Designation |As per | |C B Bhave |Chairman SEBI |CHAIRMAN | |KP Krishnan |Joint Secretary, Ministry of Finance |Member | |Anurag Goel |Secretary, Ministry of Corporate Affairs |Member | |Dr G Mohan Gopal |Director, National Judicial Academy, Bhopal |Member | |MS Sahoo |Whole Time Member, SEBI |Member | |Dr KM Abraham |Whole Time Member, SEBI |Member | |Mohandas Pai |Director, Infosys |Member | |Prashant Saran |Whole Time Member, SEBI |Member | Steps taken by SEBI to make investors aware of their rights : Brokers and Sub-brokers: Brokers and Sub-brokers Don'ts: Do not deal with unregistered intermediaries. Do not pay more than approved brokerage to the intermediaries. Do not undertakedeals for othersDo not neglect to set out in writing, orders for higher value given over phone. Do not accept blank delivery instructions slip while meeting security pay-in obligations. Do not accept unsigned/duplicate contract note/confirmationmemo.
Do not accept contract note/confirmation memo signed by anyunauthorised person. Do not delay payment/deliveries of securities to broker/ sub-broker. Do not get carried away by luring advertisements, if any. Do not be led by market rumours or get into shady transactions. Investing in Mutual Funds: Investing in Mutual Funds Dos: Read the offer document carefully before investing. Note that investments in Mutual Funds may be risky.Mention your bank account number in the application form.
Invest in a scheme depending upon your investment objective and risk appetite. Note that Net Asset Value of a scheme is subject to change depending upon market conditions. Insist for a copy of the offer document/key information memorandum before investing. Note that past performance of a scheme is not indicative of future performance. Past performance of a scheme may or may not be sustained in future. Keep track of the Net Asset Value of a scheme, where you have invested, on a regular basis. Find out about the investment profile provided in portfolio disclosures which isavailable on half yearly basis.
Investing in Mutual Funds Don'ts:Do not invest in a scheme just because somebody is offering you a commission or other incentive, gifts etc. Do not get carried away by the name of the scheme/Mutual Fund. Do not fall prey to promises of unrealistic returns. Do not forget to take note of risks involved in the investment. Do not hesitate to approach concerned persons and then the appropriate authorities for any problem. Do not deal with any agent/broker dealer who is not registered with Association of Mutual Funds in India (AMFI). Avoid herd mentality while buying / selling into mutual fund schemes.
Do not leave out KYC details in your application forms. That will make the forms liable for rejection.Do not rush into making investments that do not match your risk taking appetite and investment goals. Investors should be wary of concentrating their mutual fund portfolio in one particular asset class and not diversifying acrossvarious types of scheme profiles. Dealing in Securities: Dealing in Securities Dos: Transact only through Stock Exchanges. Deal only through SEBI registered intermediaries. Complete all the required formalities of opening an account properly (Client registration, Client agreement forms etc).
Ask for and sign “Know Your Client Agreement”. Read and properly understand the risks associated with investing in securities / derivatives before undertaking transactions.Assess the risk – return profile of the investment as well as the liquidity and safety aspects before making your investment decision. Ask all relevant questions and clear your doubts with your broker before transacting. Invest based on sound reasoning after taking into account all publicly available information and on fundamentals. Give clear and unambiguous instructions to your broker / sub-broker / depository participant. Be vigilant in your transactions.
Dealing in Securities: Dealing in Securities Don'ts: Given the benefits of trading on stock exchange it is advisable to avoid off-market transactions. Do not deal with unregistered intermediaries.Do not fall prey to promises of unrealistic returns. Do not invest on the basis of hearsay and rumors; verify before investment. Do not forget to take note of risks involved in the investment. Do not be misled by rumours circulating in the market. Do not be influenced into buying into fundamentally unsound companies (penny stocks) based on sudden spurts in trading volumes or prices or non authentic favorable looking articles / stories.
Do not follow the herd or play on momentum - it could turn against you. Do not be misled by so called hot tips. Do not try to time the market. Do not hesitate to approach the proper authorities for redressal of your doubts / grievances.
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