Importance of Securities and Exchange Board of India

In government exams like SSC, Banking, Railways, etc we find many questions from the Economy general awareness section. This is a very broad section and sometimes questions are very factual. we will cover the General awareness section comprehensively so that students can learn and get most of the questions correct in this section. In this article, we will discuss the importance of the Securities and Exchange Board of India.

Securities and Exchange Board of India: An Introduction

• The Securities and Exchange Board of India (SEBI) is a public body incorporated on April 12, 1998, under the Securities and Exchange Board of India Act 1992.
  
• Before SEBI, the regulator was the Controller of Capital Affairs, which had authority under the Capital Issues (Control) Act  1947. 
  
• The Securities and Exchange Board of India (SEBI) replaced the office of the Capital Issues Controller. 
  
• SEBI was established in 1988 by a Resolution of the Government of India essentially as a non-statutory body. It gained legal prominence with the passage of the 1992 Act. SEBI formed an autonomous entity of the Government of India as a result of this Act. 
  
• It was established to oversee the stock and capital markets of India. 

Composition :

• The Securities and Exchange Board of India, which consists of a Chair of eight other members, makes all board decisions collectively. 
  
• In addition, the Securities and Exchange Board of India appoints various committees as necessary to investigate important concerns. 
  
• A Securities Appeal Tribunal (SAT) was also established to protect the interests of companies who believe they have been harmed by one of SEBI’s decisions. 
  
• The SAT, composed of a President and two other members, has the same powers as a civil court. In addition, any person dissatisfied with the SAT’s decision or order may appeal to the Supreme Court. 

Function :

• Review of the functioning of the market, the organic structure, and the administrative control of the stock exchanges. 
  
• Supervising the registration and regulation of the activities of market intermediaries such as commercial banks, portfolio managers, stockbrokers, etc. 
  
• Supervising the registration and regulation of mutual funds, venture capital funds, and collective investment schemes. 
  Meets the requirements of three categories: 
  Issuers – By providing a market for issuers to raise their finances. 
  Investors –  ensuring security and providing accurate and accurate information. 
  Agents – Enabling a competitive professional market for agents. 
  
• By the Securities Laws (Amendment) Act, 2014, SEBI can now seize any money pooling scheme valued at Rs. 100 Cr or more and assets in the event of non-compliance. Prohibition of fraudulent and unfair business practices in the securities market. 
  
• It prohibits the practice of Insider Trading.
  
• It Educates and trains the investors. 
  
• Carrying out inspections and investigations.

Authority/Powers : 

• SEBI has access to the accounts of all publicly traded companies that are or intend to be publicly listed. However, for such an assessment, there must be reasonable grounds to believe that the company is engaged in unfair business practices or insider trading. 
  
• SEBI has the same authority as a civil court to hear any case under the 1908 Code of Civil Procedure. 
  
• SEBI has the power to regulate market intermediaries to ensure the market functions properly.
  
• If SEBI has reasons to believe that specific dealings or transactions are being handled during a means that’s harmful to investors, SEBI has the authority to inquire anybody to analyze those transactions.

Issues : 

• There is an overemphasis on the regulation of market behavior and less on prudential regulation. 
  
• SEBI’s law enforcement powers are significantly greater than those of its US and UK counterparts as it has a much greater capacity to inflict serious economic harm. 
  
• It has the power to severely restrict economic activity. This is done on the basis of suspicion, and the burden of proof of suspicion lies with the person concerned, similar to pre-trial detention. 
  
• The premarket consultation component and a method for reviewing the rules to assess whether they have achieved their stated objectives are conspicuously absent.  
  
• The securities offering documents are extremely voluminous and have been reduced significantly to formal compliance rather than resulting in high-quality substantive disclosures.