24 May 2024 | By INDIE
While many individuals are familiar with concepts like stocks and mutual funds and invest in them, there's often limited awareness about the pivotal role played by SEBI. It's common for people to engage in financial markets without fully understanding the regulatory framework that governs them. SEBI's significance in safeguarding investor interests, ensuring market integrity, and fostering market development often goes unnoticed by many.
In this blog post, we will cover SEBI's functions and regulations related to every investor's journey toward making informed decisions.
SEBI, an acronym for Securities and Exchange Board of India, is the regulatory authority overseeing India's securities market, including everyone involved in it, from online stock brokers to financial institutions. It was established in 1992 with the primary objective of regulating and developing the securities market to ensure transparency, fairness, and investor protection.
SEBI operates under the jurisdiction of the Ministry of Finance, Government of India, and plays a pivotal role in maintaining market integrity and promoting investor confidence.
SEBI fulfils a multifaceted role in regulating and developing India's securities market. Its mandate encompasses a wide range of functions. Here are some key responsibilities and functions of SEBI:
SEBI formulates regulations and guidelines governing various segments of the securities market, including stock exchanges, offline and online stock brokers, depositories, and other intermediaries. These regulations are designed to maintain market transparency, prevent market abuse, and safeguard investor interests.
SEBI monitors the securities market to detect and prevent fraudulent activities, insider trading, and market manipulation. The apex body monitors market activities in real time to maintain market integrity through advanced surveillance systems and data analytics.
SEBI regulates the issuance of securities by companies through initial public offerings (IPOs), follow-on public offerings (FPOs), and other fundraising mechanisms. It ensures that issuers comply with disclosure requirements and provide investors with accurate and timely information.
SEBI undertakes initiatives to educate investors about various investment products, risks, and regulatory obligations. It promotes investor awareness through educational programs, publications, and online resources to empower investors to make informed investment decisions.
Recommended Read: A Beginner’s Guide to Start Trading Stocks
SEBI, India, follows a corporate structure consisting of a Board of Directors, department heads, and several vital departments.
At its core, the structure of SEBI encompasses over 20 departments, each supervised by respective department heads, who are then governed by a hierarchical chain of command.
The hierarchical structure includes the following nine designated officers:
● Chairman: Nominated by the Indian Union Government.
● Two Members: Appointed from the Union Finance Ministry of India.
● One Member: Designated from the Reserve Bank of India (RBI).
● Other Five Members: Nominated by the Union Government of India.
Among the numerous departments within SEBI, some of the most critical ones include:
● Information Technology Department
● Foreign Portfolio Investors and Custodians
● Office of International Affairs
● National Institute of Securities Market
● Investment Management Department, and others
In addition to these, other essential departments manage legal, financial, and enforcement-related affairs, collectively ensuring the smooth functioning and regulatory oversight of India's securities market.
The Securities and Exchange Board of India Regulations, 1996, serve as a comprehensive framework for the management of mutual funds in India. As per these guidelines, mutual funds must register under the Trusts Act, 1882. You should also know that:
● Mutual funds exclusively dealing with the money market are obligated to register with the Reserve Bank of India (RBI).
● Asset Management Companies (AMCs) are entrusted with the management of mutual funds and must obtain approval from SEBI to operate.
● The trustees of the AMC are responsible for ensuring that mutual funds operate in compliance with regulations and perform their duties diligently.
The guidelines mandate monitoring the overall performance of mutual funds to uphold investor interests and market integrity.
