Securities and Exchange Board of India (SEBI) - overview

The securities and exchange board of India (SEBI) was established by the government of India on April 12, 1988 and was given statutory powers in 1992 with SEBI act,1992 being passed in the parliament. The SEBI act, 1992 came into force with effect from January 30, 1992.
It was established as an interim body to regulate the working of securities market and to provide protection to the investors.
SEBI was established to regulate and develop the Indian capital market and the interest of the investors in the capital market. 

After the enactment of foreign exchange regulation act in 1973, multinational corporations (MNCs) operating in India were required to dilute the promoters' shareholding through public issues. At that time, there was Controller of capital Issues (CCI). CCI used to fix issue price of shares at a much lower price than the intrinsic value of the shares offered by MNCs. As a result, listed price of shares used to be much higher than the issue price. This phenomenon attracted lots of investors from the public for making money in the short term by investing in long-term securities. There was substantial increase in business volume, both in primary and secondary markets. This also brought a highly unethical practice in the Indian capital market in the form of trading shares in grey. In addition, there used to be price rigging in shares in stock exchanges because of lack of transparency in trading. 
The government of India thought of devising a mechanism to ensure healthy practices in the capital market. As a result government established SEBI in 1988 to provide freedom to act, it was transformed into a statutory body.

SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai, and has northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad, respectively. 
Controller of capital Issues (CCI) was the regulatory authority before SEBI came into existence; it derived authority from the capital Issues act, 1947. In April 1988, the SEBI was constituted as the regulator of capital markets in India under a resolution of the Government of India.

The SEBI is managed by a board, which consists of following:
• A chairman, who shall be appointed by central government and he shall be a person of ability, integrity and standing in the field of securities market, law, finance, accountancy, economics, administration, etc. 
• Two members from amongst the officials of the Ministry of the Central government dealing with finance and administration of the Companies Act, 2013, who shall be nominated by the central government. 
• One member from amongst the official of RBI, who shall be nominated by RBI. 
• Five other members out of which atleast three members shall be whole-time members, who shall be appointed by central government and they shall be persons of ability, integrity and standing in the field of securities market, law, finance, accountancy, administration, etc.

Powers of SEBI 
1. To approve by-laws of stock exchanges.
2. To require the stock exchange to amend their by-laws.
3. To inspect the books of accounts and call for periodical returns from recognised stock exchanges.
4. To inspect the books of accounts of a financial intermediary. 
5. To compel certain companies to list their shares in one or more stock exchanges. 

Objectives of SEBI
1. Regulation of capital market.
The objective of SEBI is to regulate operations of the capital market, both primary market and secondary market. For achieving this objective, SEBI has formulated various guidelines to promote orderly functioning.
2. Protection of interests of investors.
SEBI aims at protection of interests of investors, more particularly of small investors, by guiding and educating them about investment in securities.
3. Prevention of trading malpractices.
SEBI aims at prevention of trading malpractices at stock exchanges which may be in the form of excessive speculation, forming associations by traders to manipulate share prices, insider trading, etc.
4. Promoting fair practices.
SEBI aims at promoting fair practices by prescribing code of conduct for capital market intermediaries and corporate governance for companies whose shares are listed in stock exchanges for making capital market intermediaries competitive and professional.

Authority of SEBI
1. Quasi-legislative 
SEBI drafts the rules and regulation in its legislative to protect the interest of the investors. 
2. Quasi-judicial
SEBI passes rulings and orders in its judicial capacity related to fraud and other unethical practices in the terms of securities market.
3. Quasi-executive
SEBI conductes investigation and enforcement of action against the violators in its executive function.

Though this makes it very Powerful, there is an appeal process to create accountability. There is a securities appellate tribunal which is a three-member tribunal headed by a former judge of the Bombay high court. Second appeal lies directly to the supreme court. 

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