Aligarh Muslim University: Malappuram Centre, Kerala
Aligarh Muslim University: Malappuram Centre, Kerala
Malappuram centre,kerala
Project Report
In The Course Of Company Law
TOPIC- SEBI- Functions, Features and SEBI Act
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
2
ACKNOWLEDGEMENT
Last, but not least I would like to thank my family and friends
who helped me while making this report by providing
assistance.
3
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.
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
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.
4
market. SEBI establish rules and regulations, policy framework and infrastructure to meet the
needs of the market.
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.
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.
5
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:
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.
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.
SEBI established rules and regulations and a certain code of conduct in the securities market to
restrict fraudulent and unfair trade practices.
SEBI conducts seminars both online and offline to educate the investors about insights into the
financial market and money management.
Regulatory Function
6
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.
Development Function
The development functions are the steps taken by SEBI to improve the security of the market
through technology. The functions are:
OBJECTIVES OF SEBI
The objectives of SEBI are:
7
• 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.
8
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.
9
They are:
Equity Schemes
Debt Schemes
Hybrid Schemes
Other 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.
• 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.
10
• 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.
11
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.
12
BIBLIOGRAPHY
Books-
1- Avtar Singh – company law
2- R.k bangia – company law
Websites-
1. www.scribd.com
2. www.legalbites.com
13