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Established on April 12, 1988, Securities and Exchange Board of India (SEBI) is an organisation founded to regulate and develop the Indian share market. SEBI was originally set up as a non-statutory body but was later converted into a statutory body following the Securities Exchange Board of India Act in 1992. With the passing of the Act, SEBI was granted full control over every feature of the capital market operations.
There are several functions that SEBI has to perform to ensure a smooth running of the Indian share market. Thus, to understand the plethora of duties that they are entrusted with, let’s have a look at the role of SEBI in the Indian share market.
- Regulation Of The Share Market
The key role of SEBI in the share market is to regulate activities of the stock exchanges. It records and regulates the effectiveness of mediators who are associated with the market. These comprise of share brokers, sub-brokers, retail bankers, capitalists and clerks to foreign institutional investors (FIIs), share transfer agents, underwriters, portfolio managers, depositories, investment advisors, and custodians of securities. Credit rating agencies which are related to the capital market, but are not mediators are also monitored by SEBI. Joint investment mediums such as venture capital and mutual funds also come under the regulation of SEBI. The contributions made by investors in such investment mediums are pooled in and utilised according to the predetermined objectives of the medium. However, SEBI does not monitor deposit scheme from cooperative societies and companies.
- Protective Functions
SEBI prohibits unfair and fraudulent trade practices such as insider dealing, and the committee has the power to seek data from intermediaries and companies, which can be employed to conduct enquiries. Another unfair practice that SEBI has curbed is price rigging. In price rigging, in order to gain immense profits, sometimes the businesses inflate their prices with artificial mediums and consequently, the investor is cheated by stocks. It is an illegal offence and preventing an organisation from performing it is an important function of SEBI.Thus, to ensure a fraudulent free market, SEBI ensure that price rigging is curtailed with strict guidelines.
- Share Market Development
SEBI practices several measures to improve and strengthen the share market. It regularly conducts training and educational seminars to develop and regulate the share market. To achieve this, SEBI collaborates with various organisations and also has a devoted website to give education to investors. Other than this, SEBI has the authority to grant a license to brokers and dealers of the capital market. One of the most significant developmental features of SEBI is that brokers who are registered can buy and sell easily through the internet. The concept of E-trading was introduced by SEBI a few years back to eliminate the distress of going to a physical office. Know more about Share markets.
- Grievance Mechanism
SEBI introduced the automatic complaints handling scheme to deal effectively with investor grievances. It assists investors who wish to file a complaint to SEBI against registered companies. For example, if you have a complaint against an agent such as a broker, you should try to settle the matter with the broker first. But, if you’re unsatisfied with the result, then you can approach SEBI. The applications available vary depending on the nature of the complaint. For instance, the application for complaints linked with allotment advice or refund order is different from that associated with non-receipt of dividends. An investor can easily obtain the applications from SEBI’s office or download them from the website. You can check the status of your complaint on the official website, and approach a court of law if you are not satisfied with SEBI’s judgment.
- Penalty Measures
SEBI can take appropriate measures to guard the rights of investors, and also improve the working of the share market. The actions could be implemented either in case of completed investigations or through pending investigations. A standard penalty measure is to suspend the trading of a share on the market in which it is listed. If someone is pronounced guilty, SEBI has the right to dismiss the person from trading or accessing the market, and it can also suspend an intermediary or an officer from their position. SEBI also has the power to restrict or block the bank account of an agent or an individual if they violate any regulation.
SEBI has continued to remain instrumental in delivering beneficial and active steps after the infamous Satyam scam came to light. In 2011, SEBI improved the range statements to be presented by Indian corporate promoters. Moreover, it also improved the takeover law to align the investments by eliminating regulatory structures. Apart from this, SEBI also implements certain functions like controlling and promoting companies that are self-regularised. SEBI can further summon information on any bank or intermediary. This helps them conduct inquiries and audits whenever they deem necessary if any discrepancy arises. All these measures taken by SEBI has made the Indian share market a safe place for people to invest money.