Sebi

SEBI
• Securities and exchange Board of India (SEBI) was first
established in 1988 as a non-statutory body for regulating
the securities market. It became an autonomous body on
12 April 1992 and was accorded statutory powers with the
passing of the SEBI Act 1992 by the Indian Parliament.
• The Ministry of Finance of the Government of India has
overall administrative control over its functions. On 30th
January 1992, it was given a statutory status through an
ordinance, which later on was replaced by Act of
Parliament known as Securities and Exchange Board of
India Act, 1992. SEBI is considered as watchdog of the
securities market.

Reasons for the Establishment of
SEBI:
• During 1980s, there was tremendous growth in the capital
market due to increasing participation of public. This led to
many malpractices like Rigging of prices, unofficial
premium on new issues, violation of rules and regulations
of stock exchanges and listing requirements, delay in
delivery of shares etc. by the brokers(Harshad mehta),
merchant bankers, companies, investment consultants and
others involved in the securities market.
• This resulted in many investor grievances. Because of lack
of proper penal provision and legislation, the government
and the stock i exchanges were not able to redress these
grievances of the investors. This (necessitated a need for a
separate regulatory body, and hence Securities and
Exchange Board of India was established.

Objective
Its main objective was to promote orderly and healthy
growth of securities and to provide protection to the
investors.
• The Preamble of the Securities and Exchange Board of
India describes the basic functions of the Securities and
Exchange Board of India as "...to protect the interests
of investors in securities and to promote the
development of, and to regulate the securities market
and for matters connected therewith or incidental
thereto”

Objectives of SEBI:
1. Protection: To guide, educate, and to protect the rights and
interests of the investors.
2. Competitive and Professional: To make the intermediaries like
merchant bankers, brokers etc. competitive and professional
by regulating their activities and developing a code of conduct.
3. Prevention of Malpractices: To prevent trading
malpractices.
4. Balancing: To establish a balance between statutory
regulation and self regulation by the securities industry.
5. Orderly Functioning: To promote orderly functioning stock
exchange and securities industry by regulating them.

Purpose and Role of SEBI:
• The main objective is to create such an environment which
facilitates efficient mobilization and allocation of resources through
the securities market. This environment consists of rules and
regulations, policy framework, practices and infrastructures to meet
the needs of three groups which mainly constitute the market i.e.
issuers of securities (companies), the investors and the market
intermediaries.
(i) To the Issuers: SEBI aims to provide a market place to the issuers
where they can confidently look forward to raise the required amount
of funds in an easy and efficient manner.
(ii) To the Investors: SEBI aims to protect the right and interest of
the investors by providing adequate, accurate and authentic
information on a regular basis.
(iii) To the Intermediaries: In order to enable the intermediaries to
provide better service to the investors and the issuers, SEBI
provides a competitive, professionalised and expanding market to
them having adequate and efficient infrastructure.

Functions Of SEBI
1. Regulatory Functions:
• (a) Registration of Brokers and Agents: It registers brokers, sub-
brokers, transfer agents, merchant banks etc.
• (b) Notifications of Rules and Regulations: It notifies rules and
regulations for the smooth functioning of all intermediaries in the
securities’ market.
• (c) Levying of Fees: It levies fees, penalties and other charges for
contravening its directions and orders.
• (d) Regulator of Investment Schemes: It registers and regulates
collective investment schemes and mutual funds.
• (e) Prohibits Unfair Trade Practices: SEBI prohibits fraudulent and
unfair trade practices.
• (f) Inspection and Enquiries: It undertakes inspection and conducts
enquiries & audit of stock exchange
• (g) Performing and Exercising Powers: It performs & exercises such
powers under Securities Contracts (Regulation) Act 1956, as have
been delegated to it by the Government of India.

Functions Of SEBI
• 2. Development Functions:
Development functions of SEBI are as under:
• (a) Training to intermediaries: It promotes
training of intermediaries of the securities.
• (b) Promotion of fair trade: It promotes fair trade
practices by making underwriting optional.
• (c) Research: It publishes information useful to all
market participants for conducting research.

Functions Of SEBI
• 3. Protective Functions:
• Protective Functions of SEBI are as under:
• (a) Prevents Insider Trading: It does so by prohibiting insiders such
as directors, promoters etc. to make profit through trading of
securities using confidential price sensitive information.
• (b) Prohibits Fraudulent and Unfair Trade Practices: It prohibits
fraudulent and unfair trade practices in the security market, such as
price rigging and sale or purchase of securities through misleading
statements.
• (c) Promotes Fair Practices: It promotes fair practices and code of
conduct in the securities market e.g. it looks after the interests of
the debenture holders in terms of any mid-term revision of interest
rates etc.
• (d) Educates Investors: It educates the investors through
campaigns.

Organization Structure
• The SEBI is managed by its members, which
consists of following:
• The chairman who is nominated by the Union
Government of India.
• Two members, i.e., Officers from Union Finance
Ministry.
• One member from the Reserve Bank of India.
• The remaining five members are nominated by
the Union Government of India, out of them at
least three shall be whole-time members.

Current Board Members
Shri Ajay Tyagi
Chairman, SEBI
Ms. Madhabi Puri Buch
Whole-Time Member, SEBI
Shri. S. K. Mohanty
Shri Ananta Barua
Shri G. Mahalingam
Under Section 4(1)(d) of the SEBI Act, 1992,

Current Board Members
• Part Time Members
Shri N.S.Vishwanathan
Part-Time Member, SEBI
Under Section 4(1)(c) of the SEBI Act, 1992,
Deputy Governor, Reserve Bank of India
Shri Anand Mohan Bajaj
Under Section 4(1)(b) of the SEBI Act, 1992,
Joint Secretary, Department of Economic Affairs Government of India
Shri K.V.R.Murty
Under Section 4(1)(b) of the SEBI Act, 1992,
Joint Secretary, Ministry of Corporate Affairs, Government of India
Dr. V. Ravi Anshuman
Under Section 4(1)(d) of the SEBI Act, 1992,
Professor, Indian Institute of Management, Bangalore

SEBI Committees
Date Details
15 Oct, 2019 Primary Market Advisory Committee (PMAC)
09 Jan, 2019 Research Advisory Committee (RAC)
29 Jun, 2018 Alternative Investment Policy Advisory Committee" (AIPAC)
05 Mar, 2018 Corporate Bonds and Securitization Advisory Committee (CoBoSAC)
09 Feb, 2018 Secondary Market Advisory Committee (SMAC)
23 Oct, 2017 Committee on Fair Market Conduct
16 Oct, 2017 Review of regulations and relevant circulars pertaining to Market Infrastructure Institutions (MIIs)
10 Oct, 2017 Members of Advisory Committee on Mutual Funds
02 Aug, 2017 Committee on Financial and Regulatory Technologies (CFRT)
02 Jun, 2017 Committee on Corporate Governance

SEBI Committees
24 Apr, 2017 High Powered Steering Committee on Cyber
Security (HPSC-CS)
24 Apr, 2017 Commodity Derivatives Advisory Committee
(CDAC)
17 Oct, 2016 SEBI Committee on Disclosures and Accounting
Standards (SCODA)
29 Aug, 2016 Risk Management Review Committee (RMRC)
29 Jul, 2016 Advisory Committee for SEBI Investor Protection
and Education Fund (IPEF)
22 Jul, 2015 Takeover Panel
12 Feb, 2015 Qualified Audit Report Review Committee (QARC)
29 May, 2013 Technical Advisory Committee (TAC)
06 Apr, 2011 High Powered Advisory Committee on settlement
orders and compounding of offences
12 Mar, 2009 IT Projects Advisory Committee

SEBI Committees
Date Details
18 Jul, 2019 Contact Details of Internal Complaints Committee - Western Regional Office, Ahmedabad (For WRO and the
local Offices under its jurisdiction, i.e., Indore, Jaipur, Panaji and Raipur)
18 Jul, 2019 Contact Details of Internal Complaints Committee - Eastern Regional Office, Kolkata (For ERO and the local
Offices under its jurisdiction, i.e., Bhubhaneshwar, Guwahati, Patna, and Ranchi)
20 Aug, 2018 Contact Details of Internal Complaints Committee - Northern Regional Office, New Dehli (For NRO and the local
Offices under its jurisdiction, i.e., Chandigarh, Dehradun, Jammu, Lucknow and Shimla)
20 Aug, 2018 Contact Details of Internal Complaints Committee - Southern Regional Office, Chennai (For SRO and the local
Offices under its jurisdiction, i.e., Bengaluru, Hyderabad, Kochi and Vijayawada)
03 Aug, 2018 Contact Details of Internal Complaints Committee, Mumbai
05 Jun, 2015 Alternative Investment Policy Advisory Committee (AIPAC)
12 Sep, 2013 Committee on Clearing Corporations
26 Apr, 2013 High Level Committee for reviewing the SEBI (Prohibition of Insider Trading) Regulations, 1992
05 Dec, 2012 Depository System Review Committee (DSRC)
08 Feb, 2010 Committee for review of structure of market infrastructure institutions
04 Sep, 2009 Takeover Regulations Advisory Committee
23 Mar, 2007 Committee on Infrastructure Funds

Functions of Departments / Divisions
• Commodity Derivatives Market Regulation Department
• Corporation Finance Department
• Department Economic and Policy Analysis
• Department of Debt and Hybrid Securities
• Enforcement Department - 1
• Enforcement Department - 2
• Enquiries and Adjudication Department
• General Services Department
• Recovery and Refund department
• Human Resources Department
• Division of Foreign Portfolio Investors & Custodians
• Information Technology Department
• Integrated Surveillance Department

Functions of Departments / Divisions
• Investigations Department
• Investment Management Department
• Legal Affairs Department
• Market Intermediaries Regulation and Supervision
Department
• Market Regulation Department
• Office of International Affairs
• Office of Investor Assistance and Education
• Office of the Chairman
• Regional Offices
• Vigilance Department

SEBI Guidelines For Merchant Banking

Mutual Fund Investments – SEBI
Guidelines
• The Securities and Exchange Board of India is responsible for making
policies related to mutual funds. It also has the responsibility of regulating
the industry and laying down the law so that investors’ interest is
safeguarded. So far as ‘asset allocation’ and ‘investment strategy’ are
concerned, mutual funds can be very different from one another. The new
guidelines have focused on uniformity so far as the functioning of schemes
is concerned. Investors will, therefore, find it easier to make investment
decisions. To make things standard and to introduce uniformity in schemes
that are similar to one another, the following is the manner in which
mutual funds are categorised:
• Equity funds
• Debt funds
• Balanced or hybrid funds
• Solution-oriented funds
• Other funds

Major Highlights of SEBI Regulations for
Investment in Mutual Funds
• The following are the major highlights of the regulator’s
guidelines regarding mutual funds:
• Mutual funds have been categorised into 5 groups – equity,
debt, balanced, solution-oriented, and others.
• Definitions of small, mid, and large cap have been made
clearer to facilitate uniformity.
• Solution-oriented funds come with a lock-in period.
• Only one scheme is permitted in each category, apart from
ETFs or index funds, thematic or sectoral funds, and fund of
funds.
• Apart from laying down the law, the Securities and
Exchange Board of India has also created guidelines for
investors.

SEBI Guidelines - Fresh capital Share ,
Primary & secondary markets
• SEBI advises certain guidelines in issue of fresh share capital, first issue by new companies in
Primary Market and functioning of secondary markets in order to maintain quality standards.
SEBI GUIDELINES FOR ISSUE OF FRESH SHARE CAPITAL
• 1. All applications should be submitted to SEBI in the prescribed form.
• 2. Applications should be accompanied by true copies of industrial license.
• 3. Cost of the project should be furnished with scheme of finance.
• 4. Company should have the shares issued to the public and listed in one or more recognized stock
exchanges.
• 5 . Where the issue of equity share capital involves offer for subscription by the public for the first
time, the value of equity capital, subscribed capital privately held by promoters, and their friends
shall be not less than 15% of the total issued equity capital.
• 6. An equity-preference ratio of 3:1 is allowed.
• 7. Capital cost of the projects should be as per the standard set with a reasonable debt-equity
ratio.
• 8. New company cannot issue shares at a premium. The dividend on preference shares should be
within the prescribed list.
• 9. All the details of the underwriting agreements.
• 10. Allotment of shares to NRIs is not allowed without the approval of RBI.
• 11. Details of any firm allotment in favour of any financial institutions.
• 12. Declaration by secretary or director of the company.

SEBI Guidelines for first issue by new
companies in Primary Market:
• A new company which has not completed 12
months of commercial operations will not be
allowed to issue shares at a premium.
• If an existing company with a 5-year track record
of consistent profitability, is promoting a new
company, then it is allowed to price its issue.
• A draft of the prospectus has to be given to the
SEBI before public issue.
• The shares of the new companies have to be
listed either with OTCEI or any other stock
exchange.

SEBI guidelines for Secondary market
• All the companies entering the capital market should give a statement
regarding fund utilization of previous issue.
• Brokers are to satisfy capital adequacy norms so that the member firms
maintain adequate capital in relation to outstanding positions.
• The stock exchange authorities have to alter their bye-laws with regard to
capital adequacy norms.
• All the brokers should submit with SEBI their audited accounts.
• The brokers must also disclose clearly the transaction price of securities and
the commission earned by them. This will bring transparency and
accountability for the brokers.
• The brokers should issue within 24 hours of the transaction contract notes to
the clients.
• The brokers must clearly mention their accounts details of funds belonging
to clients and that of their own.
• Margin money on certain securities has to be paid by claims so that
speculative investments are prevented.

SEBI guidelines for Secondary market
• Market makers are introduced for certain scrips by which
brokers become responsible for the supply and demand of
the securities and the price of the securities is maintained.
• A broker cannot underwrite more than 5% of the public
issue.
• All transactions in the market must be reported within 24
hours to SEBI.
• The brokers of Bombay and Calcutta must have a capital
adequacy of Rs. 5 lakhs and for Delhi and Ahmadabad it is
Rs. 2 lakhs.
• Members who are brokers have to pay security deposit and
this is fixed by SEBI.

Limitations of SEBI:
Though SEBI has started as a watchdog in protecting investors’ interests,
regulating the working of Stock Exchanges and promoting capital market, still
it faces a number of problems in its working.
• Some of these limitations are as follows:
• i. The Central Government has authorised SEBI to frame its rules and
regulations for actively monitoring capital markets. These rules and
regulations will have to be approved by the government first. This will
cause unnecessary delays and interference by the Finance Ministry.
• 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.

References
• //economictimes.indiatimes.com/articleshow/
71927521.cms?utm_source=contentofinterest
&utm_medium=text&utm_campaign=cppst
• www.sebi.gov.in
• https://www.businesstoday.in/current/policy/
sebi-panel-suggests-significant-changes-to-fpi-
regulations/story/350345.html

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