SEBI - Watchdog of the Indian Securities Market

What is SEBI?

The Securities and Exchange Board of India (SEBI) was constituted as a non-statutory body on April 12, 1988 through a resolution of the Government of India for protecting the interests of investors investing in securities along with regulating the securities market. Having its headquarters in Mumbai, it has several regional offices across the country including New Delhi, Chennai, Kolkata, Ahmedabad. SEBI also regulates how the stock market and mutual funds function.

Objectives of SEBI

Following are some of the objectives of SEBI:

1. Investor Protection: This is one of the most important objectives of SEBI. It involves protection of the interests of investors by providing guidance and ensuring that the investment is done in a safe and secure manner.

2. Preventing fraudulent and malpractices which are related to trading and rules and regulation of the stock exchange.

3. To maintain a balance between statutory regulations and self-regulation.

4. To develop a code of conduct for the financial intermediaries such as brokers, underwrites, etc.

The Structure of SEBI

SEBI India follows a corporate structure. It has Board of Directors, Senior Management, Department Heads and several other crucial departments.

SEBI board comprises of nine members. The Board consists of the following members.

A) The Chairman – Nominated by the Indian Union Government.

B) Two members belonging to the Union Finance Ministry of India.

C) One member belonging to the Reserve Bank of India or RBI.

D) Other five members – Nominated by the Union Government of India.

Functions of SEBI

Being a regulatory body, SEBI has several powers to perform vital functions. The SEBI Act of 1992 carries a list of such powers. SEBI has the following functions:

1. To protect the interests of Indian Investors in the securities market.

2. To regulate the business operations of the securities market.

3. To educate investors about the securities market and their intermediaries.

4. To prohibit insider trading and promote fair practices.

5. To conduct inquiry and audit of stock exchange.

6. To promote the development and hassle-free functioning of the stock market.

7. To monitor company take-overs and acquisition of shares.

Mutual Funds Guidelines by SEBI

The Securities and Exchange Board of India Regulations, 1996 is a set of guidelines that have been formulated to manage mutual funds in India.

A few of them are mentioned below:

A) A mutual fund sponsor, a group of company or an associate of an AMC cannot hold – 10% or more of the total shareholding and voting rights in an AMC or other mutual fund.

B) In an AMC of a mutual fund, a shareholder cannot hold 10% or more of the total shareholding either directly or indirectly.

C) For a sectorial or thematic index, none of the single stocks can have over 35% weight in the said index. While for other indices the cap is 25%.

D) When it comes to the top three constituents of the index, their aggregate weight cannot exceed beyond 65%.

E) When it comes to an individual constituent of the index, the trading frequency should be at least a minimum 80%.

At the end of every calendar year, mutual funds must ensure that they have been in accordance with the guidelines issued by the Securities and Exchange Board of India.

Conclusion

The Securities and Exchange Board of India or SEBI acts as a “Watchdog” of the security market. It regulates the market and protect the investors by keeping a check on various manipulative activities.

Thus, SEBI plays a crucial role in ensuring transparency and fairness in the securities market and is instrumental in promoting investor confidence in the Indian capital markets.