Explain the Functioning of the Security and Exchange Board of India as per SEBI act 1992?
AUTHOR-Sakshi R. Patil, PUNE UNIVERSITY, BALAJI LAW COLLEGE
Security and Exchange Board of India i.e. SEBI is the body owned by the Government of India. The Securities and Commodities in the Indian Market are regulated by SEBI. This regulatory board was established on 12th April 1988. With the passing of the SEBI Act in 1992 by the Indian Parliament, the Security and Exchange Board of India was granted statutory powers on 30th January 1992.
The agenda behind the Act is to protect the interest of investors and to enact regulations for the development of Indian capital markets.
The headquarters of SEBI is at Bandra-Kurla Complex in Mumbai and it also has the Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai, and Ahmadabad respectively. SEBI has its local offices at Jaipur, Bangalore, Guwahati, Bhubaneswar, Patna, Kochi and Chandigarh.
SECURITY AND EXCHANGE BOARD OF INDIA ACT -1992
(SEBI Act 1992)
The SEBI Act was enacted in the Forty-third year of the Republic India by the Indian parliament to provide for the establishment of a Board 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.
Act Title: The Securities and Exchange Board of India Act, 1992
Act ID: 199215
Act Year: 1992
Enactment date: 04-04-1992
Ministry: Ministry of Finance
Department: Department of Economic Affairs
Enforcement date: 30-01-1992
With powers to encompass the regulation of the stock exchange and other security markets, it also audits the performance of registrars, stock-brokers, sub-brokers, trustees of trust deeds, bankers, portfolio managers and other intermediaries.
STRUCTURE OF SEBI:
There are total nine members on the SEBI Board;
CHAIRMAN: Appointed by the Government of India
TWO MEMBERS: Officers from the Union Finance Ministry
ONE MEMBER: From Reserve Bank of India
FIVE MEMBERS: Appointed by the Union Government of India.
To protect the entities that feel aggrieved by the SEBI decision, a Securities AppellateTribunal (SAT) a statutory body established under the provisions of the SIBE Act 1992 is constituted. SAT consists of the presiding officer and two other members. The powers vested in SAT are similar to those of the Civil Court. If any party feels aggrieved by the decision/order of the Securities Appellate Tribunal, an appeal can be made to the Supreme Court.
Since the formation of the Security and Exchange Board of India (SEBI), the trust of investors in the Indian Stock Market has been rebuilt. With many innovative steps, the SEBI executes its functions through various departments. There are almost 20 departments in the organizational structure of SEBI.
The departments are:
Commodity Derivatives Market Regulation Department (CDMRD)
Corporation Finance Department (CFD)
Department Economic and Policy Analysis (DEPA)
Department of Debt and Hybrid Securities (DDHS)
Enforcement Department – 1 (EFD1)
Enforcement Department – 2 (EFD2)
Enquiries and Adjudication Department (EAD)
General Services Department (GSD)
Human Resources Department (HRD)
Information Technology Department (ITD)
Integrated Surveillance Department (ISD)
Investigations Department (IVD)
Investment Management Department (IMD)
Legal Affairs Department (LAD)
Market Intermediaries Regulation and Supervision (MRD)
Market Regulation Department (MIRSD)
Office of International Affairs (OIA)
Office of Investor Assistance and Education (OIAE)
Office of the Chairman (OCH)
Regional Offices (RO’s)
FUNCTION OF SEBI:
After SEBI is established as a statutory body, the SEBI functions are listed in SEBI Act, 1992. The major role of the SEBI under the Act is to protect the need of three parties i.e. Securities, Traders, Investors & Intermediaries in the Indian Stock-Exchange Market of India.
The functions of SEBI enlist in the act are divided into three parts;
As traders are the base of the Capital Markets, SEBI’s major role is to protect the interest of traders and none of the investors become the victim of any trade fraud. It prevents and checks price manipulation.
It also bans inside trading, where SEBI prevents purchasing own shares from the secondary market by blocking the trust of listed companies and employee welfare schemes.
SEBI ensures all the market transaction takes place smoothly and securely and prohibits unfair fraud trade practices.
It monitors the activity of financial intermediates.
A fair code of conduct in the security market is promoted.
SEBI also organizes certain seminars and programs which help educate investors and traders from time to time to evaluate better investment options.
To bring advancement and freshness in the Indian Financial Market, various innovations by SEBI are introduced. Some of the developmental functions are;
For the streamlining process in the Financial Market, an electronic platform is introduced.
Training for financial intermediaries
Facilitates promoting activities of the stock exchange
The SEBI Bye-Laws are enforced to the corporate and financial intermediaries. Some of the regulatory functions are;
Enforcement of defined guidelines and code of conduct to corporate and financial intermediaries
Registration of all intermediaries, trustees, share-market agents, etc in SEBI
Regulation of functioning of mutual funds and takeover of companies.
POWERS OF SEBI:
The powers of SEBI are registered in SEBI Act 1992. There are three major powers SEBI has a regulatory body.
In terms of the securities market which helps in ensuring transparency, fairness, accountability, and reliability, SEBI has the power to give judgments in relation to unethical and fraudulent practices. The SEBI PACL case judgment is one such judgment passed by SEBI in fraud and unethical activity.
The SEBI has the power to frame and implements the regulations and judgments for violation of such regulations by any person. It also has the power to inspect books of accounts and other documents if it suspects the violation of the regulation.
To protect the interest of the investors, the SEBI has the power to frame rules and regulations to avoid malpractices. Regulations involve listing obligation, trading regulations, and disclosure requirements
Apart from these three powers;
SEBI by Securities Laws (Amendment) Act, 2014is now able to regulate any money pooling scheme worth Rs. 100 cr. or more and attach assets in cases of non-compliance.
Board can seek the information, such as telephone call data records, from any person or entity in respect to any securities transaction being investigated.
Chairman of SEBI has authority to order, search and seizure operations.
The SEBI Act provides authority to SEBI to regulate capital market and it also enforce guidelines in few areas like,
Employee Stock Option schemes
Disclosure and Investor Protection norms
Anti-money laundering norms
Listing and delisting of securities
Opening of trading terminals overseas
SEBI -LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENT REGULATIONS:
Listing Obligations and Disclosure Requirements (LODR) regulations for SEBI covers the extent of transparency and disclosures that listed companies have to abide by. In addition to the compulsory disclosure norms, the regulation also refines the listing agreement, which has to be entered between the stock exchange and the companies being listed.
LODR consists of terms and conditions on governance, disclosures, and terms to maintain the listing status of the company.
The SEBI (LODR) Regulations, 2015 entails the following:
Disclosures and obligations that have to be acknowledged by the compliance officers of the listed company
Listing down obligations uniform to all listed companies
Distinct obligations for certain types of securities
Segregating initial issuance and post-IPO norms
Communication of the companies’ fundraising activities
Establishing timelines for notifying the exchanges of certain events
Bringing SMEs under the ambit of the SEBI (LODR) Regulations
A complete list of regulations that govern the market regulator is available on the official-website of SEBI.
SEBI-ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS REGULATION (ICDR)
ICDR is introduced in 2009 which governs the provision for dealing with matters related to capital and disclosures made by the listed companies in India. In order to make it flawless, secured, and beneficial for both the listed companies and investors the ICDR regulation is introduced.
SEBI- SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS REGULATIONS (SAST)
To resolve the issues related to the legal and fair recovery of stock and takeovers, SEBI-Substantial Acquisition of shares and takeovers regulations, 2011(SAST) is introduced.
For Fairness and Securities in the trade market, the SEBI is formed for the betterment of traders and investors in the Indian Market. The SEBI regulatory system in relation to the stock market is strengthening. With the need for attitudinal change, SEBI must give special attention to human resources and matters related to the board. The Indian market is still segmented; the failure of the Indian Market cannot be blamed on a single body. To remove the overlap and boundaries a unified regulatory body plays the major role. The basic function of the SEBI is to ensure the protection of the interest of investors in securities. The Act was enacted under the board to regulate the matters of the stock exchange in the Indian financial market. Thus, the functioning of the Securities and Exchange Board of India is regulated under the Securities and Exchange Board of India Act 1992.