ALIGARH MUSLIM UNIVERSITY

Malappuram centre,kerala

Project Report
In The Course Of Company Law
TOPIC- SEBI- Functions, Features and SEBI Act

SUBMITTED TO- SUBMITTED BY-

MR.SHAKEEL AHMAD VAIBHAV TEOTIA

ASST PROF. ROLL NO. 18BALLB03

DEPT. OF LAW. EN. NO GJ 3957

CONTENTS
S.No. Particulars. P.No
1 Acknowledgement 3

2. Introduction 4

3 4
SEBI
4 4
Reason for establishment
5 4
Purpose of Sebi
6. 5
Organizational structure
7. 5
Functions of Sebi
8 7
Objects of Sebi
9 8

10 Features of Sebi 8

11 Powers of Sebi 8

12 SEBI Act 9

13 Conclusion 12

14 13
Bibliography

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ACKNOWLEDGEMENT

First of all , I would like to express my gratitude To almighty to

enabling me to complete this report On this topic“ SEBI-
Functions ,features and SEBI Act”

Then thanks to academic supervisor Mr. Shakeel Ahmad

(Assisstant Professor ,Department of law, Aligarh Muslim
University). She gave me certain guidance how to Write and
research.

Last, but not least I would like to thank my family and friends
who helped me while making this report by providing
assistance.

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INTRODUCTION
SEBI is also known as the Security and Exchange Board of India was established on 12 April
1992 through the SEBI Act, 1992. It was a non-statutory body established to regulate the
securities market. The headquarters of the board is situated in Bandra Kurla Complex, Mumbai.
SEBI helps in regulating the Indian Capital Market by protecting the interest of investors and
establishing the rules and regulations for the development of the capital market.

SEBI- SECURITY AND EXCHANGE BORAD OF INDIA

SEBI or the Security and Exchange Board of India is a regulatory body controlled by the
Government of India to regulate the capital and security market. Before the Security and
Exchange Board of India, the Controller of Capital Issues was the regulating body to regulate
the market which was controlled by the Capital Issues (Control) Act, 1947.

Majorly, SEBI controls the issuers of securities, the investors and the market intermediaries. The
Board draft regulations and statutes under its legislative authority, also pass rulings and orders
under its judicial capacity and operate investigations in its executive limits. SEBI works as a
barrier to avoid malpractices related to the stock market by establishing a code of conduct and
promoting the healthy functioning of the stock exchange. Initially, SEBI didn’t have the
authority to regulate the stock exchange, but in 1992 the Union Government gave statutory
powers to SEBI through the SEBI Act, 1992

REASONS FOR THE ESTABLISHMENT OF SEBI

During the fall of the 1970s and the rise of the 1980s, the people of India were preferring to work
in the Capital Market as the market was trending. Without any authority, problems like unofficial
private placements, the rigging of prices, unofficial self-styled merchant bankers started
violating the rules and regulations of the stock exchange which caused delays in the delivery of
shares.

The Government felt an immediate need to establish a regulatory body to regulate its working
and to find solutions for all the problems the market was going through, as the people were losing
interest in the market. This led to the establishment of the Security and Exchange Board of India.

PURPOSE AND ROLE OF SEBI

SEBI helps in creating a healthy environment to facilitate an effective mobilization between the
market participants and investors. It helps in locating the resources with the help of the securities

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market. SEBI establish rules and regulations, policy framework and infrastructure to meet the
needs of the market.

The financial market majorly comprises of three groups:

The Issuer of Securities

Issuers are the group that works in the corporate department to easily raise funds from the various
sources of the market. So, SEBI helps the issuers by providing them a healthy and open
environment to work efficiently.

Investors
The investors are the soul of the market as they keep the market alive by providing accurate
supplies, correct information, and protection to the people on a daily basis. SEBI helps investors
by creating a malpractice free environment to attract and protect the money of the people who
invested in the market.

Financial Intermediaries
The intermediaries are the people who act as middlemen between the issuers and the investors.
SEBI helps in creating a competitive professional market which gives a better service to the
issuers and the investors. They also provide efficient infrastructure and secured financial
transactions.

ORGANIZATIONAL STRUCTURE OF SEBI

The members of the Security and Exchange Board of India are:

• The Chairman who is appointed by the Union Government of India.

• Two members who are selected from the officers of the Union Finance Ministry.
• One member who is appointed from the Reserve Bank of India.
• The other five members are appointed by the Union Government of India, out of five
three must be whole-time members.

Dr. S.A. Dave was the first Chairman of SEBI who was appointed on 10th April 1988. Ajay
Tyagi is the present Chairman appointed on 10th February 2017 replacing U K Sinha.

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FUNCTIONS OF SEBI
SEBI basically protects the interest of the investors in the security market, promotes the
development of the security market and regulates the business. The functions of the Security and
Exchange Board of India can primarily be categorized into three parts:

Protective Function

Protective functions are used to protect the interest of investors and other financial participants.
These functions are:

Prevent Insider Trading:

When the people working in the market like director, promoters or employees working in the
company starts to buy or sell the securities because they have access to the confidential price
which results in affecting the price of the security is known as insider trading. SEBI restricted
companies to buy their own shares from the secondary market and SEBI also regulates regular
check-ups to prevent insider trading and avoid malpractices.

Checks price rigging:

The malpractices which create unreasonable fluctuations in the price of the securities with the
help of increasing or decreasing the market price of stocks which results in an immense loss for
the investors or traders are known as price rigging. To prevent price rigging, SEBI keeps active
surveillance on the factors which can promote price rigging.

Promotes fair trade practices:

SEBI established rules and regulations and a certain code of conduct in the securities market to
restrict fraudulent and unfair trade practices.

Providing awareness/financial education for investors:

SEBI conducts seminars both online and offline to educate the investors about insights into the
financial market and money management.

Regulatory Function

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Regulatory functions are generally used to check the functioning of the financial business in the
market. They establish rules to regulate the financial intermediaries and corporates for the
efficiency of the market. These functions are:

➢ SEBI designed guidelines and code of conduct for efficient working of financial
intermediaries and corporate.

➢ Established rules for taking over a company.

➢ Conducts regular inquiries and audits of stock exchanges.

➢ Regulates the process of mutual funds.

➢ Registration of brokers, sub-brokers, and merchant bankers is controlled by SEBI.

➢ Levying of fees is regulated by SEBI.

➢ Restrictions on private placement.

Development Function

The development functions are the steps taken by SEBI to improve the security of the market
through technology. The functions are:

➢ By providing training sessions to the intermediaries of the market.

➢ By promoting fair trading and restrictions on malpractices of any kind.

➢ By introducing the DEMAT format.

➢ By promoting self-regulating organizations.

➢ By introducing online trading through registered stock brokers.

➢ By providing discount brokerage.

OBJECTIVES OF SEBI
The objectives of SEBI are:

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 • Protection of investors: The primary objective of SEBI is to protect the rights and
interests of the people in the stock market by guiding them to a healthy environment and
protecting the money involved in the market.
• Prevention of malpractices: The main objective for the formation of SEBI was to prevent
fraud and malpractices related to trading and to regulate the activities of the stock
exchange.
• Promoting fair and proper functioning: SEBI was established to maintain the functioning
of the capital market and to promote functioning of the stock exchange. They are ordered
to keep eyes on the activities of the financial intermediaries and regulate the securities
industry efficiently.
• Establishing Balance: SEBI has to maintain a balance between the statutory regulation
and self-regulation of the securities industry.
• Establishing a code of conduct: SEBI is required to develop and regulate a code of
conduct to avoid frauds and malpractices caused by intermediaries such as brokers,
underwriters and other people.

FEATURES OF SEBI
Sebi is an organization that is responsible for maintaining an environment that is free from
malpractices to restore the confidence of the general public who invest their hard-earned money
in the market. SEBI controls the bylaws of every stock exchange in the country. SEBI keeps an
eye on all the books of accounts related to the stock exchange and financial intermediaries to
check their irregularities. The features of the Security and Exchange Board of India are given
below:

QUASI-JUDICIAL
SEBI is allowed to conduct hearings and can pass judgments on unethical cases and fraudulent
trade practices. This feature of SEBI helps to protect transparency, accountability, reliability,
and fairness in the capital market.

QUASI-LEGISLATIVE
SEBI is allowed to draft legislatures with respect to the capital market. SEBI drafts rules and
regulations to protect the interests of the investors. For eg: SEBI LODR or Listing Obligation
and Disclosure Requirements. This helps in consolidating and streamlining the provisions of
existing listing agreements for several segments of the financial market like equity shares. This
helps in protecting the market from malpractices and fraudulent trading activities happening at
the bay.

QUASI-EXECUTIVE
SEBI covers the implementation of the legislation. They are allowed to file a complaint against
any person who violates their rules and regulations. They also have the power to inspect all the
books and records to check for wrongdoings.

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POWERS OF SEBI
1. Powers relating to stock exchanges & intermediaries
SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities. It
can ask information from the stock exchanges and intermediaries regarding
their business transactions for inspection or scrutiny and other purpose.

2. Power to impose monetary penalties

SEBI has been empowered to impose monetary penalties on capital market intermediaries and
other participants for a range of violations. It can even impose suspension of their registration
for a short period.

3. Power to initiate actions in functions assigned

SEBI has a power to initiate actions in regard to functions assigned. For example, it can issue
guidelines to different intermediaries or can introduce specific rules for the protection of interests
of investors.

4. Power to regulate insider trading

SEBI has power to regulate insider trading or can regulate the functions of merchant bankers.

5. Powers under Securities Contracts Act

For effective regulation of stock exchange, the Ministry of Finance issued a Notification on 13
September, 1994 delegating several of its powers under the Securities Contracts (Regulations)
Act to SEBI.
SEBI is also empowered by the Finance Ministry to nominate three members on the Governing
Body of every stock exchange.

6. Power to regulate business of stock exchanges

SEBI is also empowered to regulate the business of stock exchanges, intermediaries associated
with the securities market as well as mutual funds, fraudulent and unfair trade practices relating
to securities and regulation of acquisition of shares and takeovers of companies.

MUTUAL FUND REGULATIONS BY SEBI:

SEBI has also made few policies and laid down guidelines for the mutual funds in order to
safeguard the interests of the investors.These guidelines have been laid to bring uniformity in
the working of the similar mutual funds’ scheme which will help the investors to make their
investment decisions more clearly.To bring uniformity in the functionality of the similar mutual
fund scheme, SEBI has categorised mutual funds in the five broad categories:

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They are:

Equity Schemes

Debt Schemes

Hybrid Schemes

Solution Oriented Schemes

Other Schemes

Other SEBI guidelines for Mutual Funds are as follow:

SEBI has reclassified large, mid and small-cap companies as follows:

➢ There is a lock-in period specified for solution-oriented schemes

➢ Permission of only one scheme in each category, except for Index Funds/ Exchange
Traded Funds (ETF), Sectoral/Thematic Funds and Funds of Funds.

SEBI ACT
The Parliament established the Securities and Exchange Board of India Act,1992 or SEBI Act,
1992 to regulate and develop the securities market in India. It was further amended to meet the
changes in the developing requirements of the securities market.

FEATURES AND REGULATIONS OF THE ACT

Sebi is an organization that is responsible for maintaining an environment that is free from
malpractices to restore the confidence of the general public who invest their hard-earned money
in the market. SEBI controls the bylaws of every stock exchange in the country. SEBI keeps an
eye on all the books of accounts related to the stock exchange and financial intermediaries to
check their irregularities. SEBI Act defines and gives powers to the body. The SEBI Act is
divided into seven chapters that provide the rules and regulations associated with the capital
market.

• The First Chapter is an introductory or preliminary chapter of the Act which provides the
title, extent, and definitions of the terms used in the Act.

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• The Second Chapter is the establishment of the Securities and Exchange Board of India. This
chapter deals with management, employees, meetings, and the office of the board. This
provides the necessary details of the board established by this Act.
• The Third Chapter is the transfer of assets, liabilities, etc. of the existing Security and
Exchange Board to the Board, which means it declares the provisions to be used to transfer
the assets in the case of the formation of a new board.
• The Fourth Chapter is the powers and functions of the Board. This chapter helps in
mentioning the powers and functions of the board which are given by the Act. The Board is
bound to follow the instructions given by the act and is not allowed to exploit their powers.
• The Fifth Chapter is the Registration Certificate. It deals with the documentation involved in
the registration of the stockbrokers, sub-brokers, and share transfer agents, etc.
• The Sixth Chapter is finance, accounts, and audits. This chapter controls all the grants given
by the Central Government, funds and accounts, to ensure the productivity of the board as
well as the capital market.
• The Seventh Chapter miscellaneous, which discusses other topics that are relevant to the
board and the market. To help the board from avoiding mistakes.

The laws and regulations of the Security and Exchange Board of India are very important and
must be followed seriously by the people who are entitled or registered with the stock exchange
and capital market of India. The SEBI Act, 1992 is the supreme power of the securities market
of India and has the authority to make laws and regulations. And these rules and regulations are
applied to all the listed companies, their board of directors, key managerial personnel of such
companies, investors, and all the other companies who are associated with the security market
sector.

THE MOST VALUABLE REGULATIONS PROMOTED BY SEBI ARE

• Regulations on the Issue of Capital and Disclosure Requirements, 2009
These regulations helped with the issues related to capital and disclosure by improving the
trading in securities of the listed companies and investors in India.

• Regulations on Substantial Acquisition of Shares and Takeovers, 2011

These regulations of SEBI were established to solve difficulties related to the legal and fair
acquisition of shares and takeovers.

• Regulations on Prohibition of Insider Training, 2015

These regulations introduced new provisions for prohibiting the insider training of securities and
tries to protect the laws for lawful and fair trading in India.

• The Equity Listing Agreement

These provisions were a reminder of the clauses which mainly dealt with the mandatory
compliances to be made between the stock exchange of India and the listed companies.

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CONCLUSION
So, SEBI strongly believes that the investors are the soul of the securities market and they need
to protect the interests of investors for the development of the capital market. SEBI deals with
all the policies and regulations of the market. SEBI also signed a contract with the International
Organization of Securities Commission and allowed its members to maintain a regular check for
cross border misconduct in their respective jurisdictions. This case is considered as the landmark
judgment in India’s Corporate Landscape as it helped in preventing war between MCA and
SEBI.

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BIBLIOGRAPHY
Books-
1- Avtar Singh – company law
2- R.k bangia – company law
Websites-
1. www.scribd.com
2. www.legalbites.com

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