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The Securities and Exchange Board of India PROJECT
The Securities and Exchange Board of India PROJECT
PROJECT REPORT ON
SEBI
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Executive Summary
The study of a good grasp of SEBI and its laws as they are
really practised in the market is encapsulated in the report.
Along with a detailed examination of SEBI's key ideas and
rules relating to capital markets.
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S. No. Particulars Page No.
12 Conclusion 26
13. Bibliography 27
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Objectives and Scope of Project
Objective
This study was primarily intended to assess SEBI's performance
in relation to the supervision of securities markets by various
intermediaries registered with SEBI, as well as to determine
what types of Investor Protection measures have been
implemented by SEBI for the benefit/protection of investors in
India since 1992.
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I
Introduction
To regulate the Indian stock market and protect investors from
trading malpractices like price ragging and insider trading, etc,
the Government of India established the Security Exchange
Board of India (SEBI) on 11 April 1988. It has it’s headquartered
in Mumbai and it has it’s a regional office in New Delhi,
Ahmedabad, Chennai, and Kolkata. A total of 17 stock exchanges
are currently operating in India, including NSE (National Stock
Exchange) and BSE ( Bombay Stock Exchange). All their stock
exchanges are operated and regulated by SEBI.
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SEBI has also commenced regulating the commodity derivatives
market under the Securities Contract Regulation Act (SCRA)
1956 with effect from September 28 2015, and the Forward
Contracts Regulation Act (FCRA) 1952 got replaced with effect
from September 29 2015.
SEBI has introduced the comprehensive regulatory measures,
prescribed registration norms, the eligibility criteria, the code of
obligations and the code of conduct for different intermediaries
like, bankers to issue, merchant bankers, brokers and sub-
brokers, registrars, portfolio managers, credit rating agencies,
underwriters and others. It has established bye-laws, risk
identification and risk management systems for stock exchange
clearing houses, monitoring systems, and other measures to
make securities trading safe and transparent for end investors.
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Establishment of SEBI
At the end of the 1970s and during 1980s, capital markets were
emerging as the new sensation among the individuals of India.
Many malpractices started taking place such as unofficial self-
styled merchant bankers, unofficial private placements, rigging of
prices, non-adherence of provisions of the Companies Act,
violation of rules and regulations of stock exchanges, delay in
delivery of shares, price rigging, etc.
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An environment like this is made up of policy frameworks, rules
and regulations, infrastructures, and practises that are designed
to fulfil the needs of various classes of individuals who are the
market's key actors. Investors, market intermediaries, and
organisations that are securities issuers are only a few of them.
For the Purpose of Investors
Investors get the credit for making the market active. SEBI’s
motive is to provide accurate, authentic, and adequate
information on a regular basis in order to protect investors'
interests and rights. this is done in order to renew the confidence
of investors or the general public in investing their money in the
market.
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SEBI is authorised to create an ever-expanding, professionalised, and competitive market for intermediaries, with an efficient and
suitable infrastructure. Because of the function of intermediaries,
financial transactions become safer and smoother. They are also
referred to as securities market brokers.
Organizational Structure of SEBI
SEBI has a corporate structure that is divided into numerous
departments, each of which is led by a department head. SEBI is
divided into around 20 departments. Corporate finance, economic
and policy research, debt and hybrid securities, enforcement,
human resources, investment management, commodities
derivatives market regulation, legal affairs, and others are just a
few of the departments.
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The SEBI Board consist of nine members-
Protective Function
Regulatory Function
Development Function
Protective Functions
As the name suggests, these functions are performed by SEBI to
protect the interest of investors and other financial participants.
It includes-
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Regulatory Functions
These functions are basically performed to keep a check on the
functioning of the business in the financial markets.
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It ensures that investors are educated on the intermediaries of
securities markets.
It monitors substantial acquisitions of shares and take-over of
companies.
SEBI takes care of research and development to ensure the
securities market is efficient at all times.
SEBI provides a platform for stockbrokers, sub-brokers,
portfolio managers, investment advisers, share transfer agents,
bankers, merchant bankers, trustees of trust deeds, registrars,
underwriters, and other associated people to register and
regulate work.
It regulates the operations of depositories, participants,
custodians of securities, foreign portfolio investors, and credit
rating agencies.
It prohibits insider trading, i.e. fraudulent and unfair trade
practices related to the securities market.
Powers of SEBI
The SEBI has three main powers:
Quasi-Judicial: SEBI has the authority to deliver judgements
related to fraud and other unethical practices in terms of the
securities market. This helps to ensure fairness, transparency,
and accountability in the securities market.
Quasi-Executive: SEBI has the authority to enforce the rules
and judgments imposed, as well as to take legal action against
those who break them. It also has the authority to examine
books of accounts and other documentation if it suspects a
breach of the rules.
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3. Quasi-Legislative: SEBI reserves the right to frame rules and
regulations to protect the interests of the investors. Some of its
regulations consist of insider trading regulations, listing
obligations, and disclosure requirements. These have been
formulated to keep malpractices at bay. Despite the powers, the
results of SEBI’s functions still have to go through the Securities
Appellate Tribunal and the Supreme Court of India.
When it comes to stock exchanges, SEBI has the power to
regulate and approve any laws related to functions in the stock
exchanges.
It can also conduct hearings and pass judgments if there are any
malpractices detected on the stock exchanges.
It can also make companies list their shares in more than one
stock exchange if they see that it will be beneficial to investors.
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Introduction- to the Capital Market
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There are two types of capital market:
Primary Market:
The primary market is a new issue market; it solely deals with
the issues of new securities. A place where trading of securities
is done for the first time. The main objective is capital formation
for government, institutions, companies, etc. also known as
Initial Public Offer (IPO). Now, let us have a look at the functions
of primary market:
Origination: Origination is referred to as examine, evaluate,
and process new project proposals in the primary market. It
begins prior to an issue is present in the market. It is done with
the help of commercial bankers.
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2.Underwriting: For ensuring the success of new issue there is
a need for underwriting firms. These are the ones who guarantee
minimum subscription. In case, the issue remains unsold the
underwriters have to buy. But if the issues are completely
subscribed then there will be no liability left for them.
Secondary Market:
The secondary market is a place where trading takes place for
existing securities. It is known as stock exchange or stock
market. Here the securities are bought and sold by the
investors. Now, let us have a look at the functions of secondary
market:
1. Regular information about the value of security.
2. Offers liquidity to the investors for their assets.
3. Continuous and active trading.
4. Provide a Market Place.
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Importance of Capital Market
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9. Capital market provides opportunities for different
institutions such as , mutual funds, investment trust; etc., to
earn a good return on the investing funds. They employ financial
experts who are able to predict the changes in the market and
accordingly undertake suitable portfolio investments.
11. The capital market not only reflects the general condition of
the economy, but also smoothens and accelerates the process of
economic growth. Various institutions of the capital market, like
nonbank financial intermediaries, allocate the resources
rationally in accordance with the development needs of the
country. The proper allocation of resources results in the
expansion of trade and industry in both public and private
sectors, thus promoting balanced economic growth in the
country.
12. The capital market tends to stabilise the values of stocks and
securities and reduce the fluctuations in the prices to the
minimum. The process of stabilisation is facilitated by providing
capital to the borrowers at a lower interest rate and reducing
the speculative and unproductive activities.
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Role of SEBI in Capital Market
SEBI is regulator to control Indian capital market. Since its
establishment in 1992, it is doing hard work for protecting the
interests of Indian investors. SEBI gets education from past
cheating with naive investors of India. Now, SEBI is more
strict with those who commit frauds in capital market.
The role of security exchange board of India (SEBI) in regulating
Indian capital market is very important because government of
India can only open or take decision to open new stock
exchange in India after getting advice from SEBI.
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3. To Stop fraud in Capital Market :
SEBI has many powers for stopping fraud in capital market.
It can ban on the trading of those brokers who are involved
in fraudulent and unfair trade practices relating to stock
market.
It can impose the penalties on capital market intermediaries
if they involve in insider trading.
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:
For reducing the risk of investors, SEBI has now been decided to
permit Stock Exchanges to introduce derivative contracts on
Volatility Index, subject to the condition that;
a. The underlying Volatility Index has a track record of at
least one year.
b. The Exchange has in place the appropriate risk
management framework for such derivative contracts.
i. Contract specifications
ii. Position and Exercise Limits
iii. Margins
iv. The economic purpose it is intended to serve
v. Likely contribution to market development
vi. The safeguards and the risk protection mechanism adopted
by the exchange to ensure market integrity, protection of
investors and smooth and orderly trading.
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:
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Advantages and Limitation of SEBI
Advantages of SEBI
A. It promotes healthy and orderly growth of securities market
and protects investors.
B. It helps in maintaining steady flow of savings into capital
market.
C. It helps in regulating security market and ensures fair
practice by issuers to help them raise resources at minimum
cost.
D. It promotes efficient services by brokers, merchant bankers
and other intermediaries to make them professional and
competitive.
E. It helps and contributes in promoting investor education,
training of intermediaries and it conducts research and provide
information to market participants.
F. SEBI operated to develop the capital market.
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Limitation of SEBI
Advantages and Limitation of SEBI
ii. SEBI will have to seek prior approval for filing criminal
complaints for violations of the regulations. This will again cause
delays at government level.
iii. SEBI has not been given autonomy. Its Board of Directors is
dominated by government nominees. The Chairman of the Board
has no fixed tenure and can be sacked with three months’
notice. These appointments should be for a fixed tenure to
regulate the SEBI’s working in the long run.
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Conclusion:
Limitation of SEBI
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stock market.
The bureaucratic delays in clearing the rules will hamper the
working of SEBI. The government should direct SEBI to frame or
change the rules as per the demand of the situation so that it is
able to achieve professional efficiency.
ii. SEBI will have to seek prior approval for filing criminal
complaints for violations of the regulations. This will again cause
delays at government level.
iii. SEBI has not been given autonomy. Its Board of Directors is
dominated by government nominees. The Chairman of the Board
has no fixed tenure and can be sacked with three months’
notice. These appointments should be for a fixed tenure to
regulate the SEBI’s working in the long run.
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Bibliography:
https://www.sebi.gov.in/
https://www.nseindia.com/
https://nsdl.co.in/
https://www.wikipedia.org/
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