Home   »   Role of SEBI

Role of SEBI

Context:  The Securities and Exchange Board of India (SEBI) unveiled its new logo at a ceremony marking the regulatory body’s 35th foundation day.

What is SEBI?

  • Establishment: The Securities and Exchange Board of India was established as a statutory body in the year 1992.
    • The provisions of the Securities and Exchange Board of India Act, 1992 came into force on January 30, 1992.
  • History: Before SEBI came into existence, Controller of Capital Issues was the regulatory authority; it derived authority from the Capital Issues (Control) Act, 1947.
    •  In 1988, SEBI was constituted as the regulator of capital markets in India.
    •  Initially, SEBI was a non-statutory body without any statutory power.
    • Following the passage of the SEBI Act by Parliament in 1992, it was given autonomous and statutory powers.
  •  Structure: SEBI Board consists of a Chairman and several other whole time and part time members.

What are Powers and Functions of SEBI?

  • Main functions: It is the regulator of the securities and commodity market in India owned by the Government of India.
    • SEBI also aims to check fraudulence by harmonising its statutory regulations and self-regulating business.
    • It also enables a competitive professional market for intermediaries.
    • SEBI provides a marketplace in which the issuers can increase finance properly.
    • It also ensures safety and supply of precise and accurate information from the investors.
    • SEBI analyses the trading of stocks and saves the security market from the malpractices.
    •  It controls the stockbrokers and sub- stockbrokers.
    •  It provides education regarding the market to the investors to enhance their knowledge.
  • Powers: It is a quasi-legislative and quasi-judicial body which can draft regulations, conduct inquiries, pass rulings and impose penalties.
    • SEBI has powers to regulate any pooling of funds for investments aggregating Rs 100 crore or more by an individual or a company.
    • Chairman SEBI has powers to authorize the carrying out of search and seizure operations.
Powers and Functions of SEBI
Powers and Functions of SEBI

What is Securities Appellate Tribunal?

  • Securities Appellate Tribunal is a statutory body established under the Securities and Exchange Board of India Act, 1992.
  • Its main function is to hear and dispose of appeals against orders passed by the Securities and Exchange Board of India.
  • The Tribunal has the same powers as are vested in a civil court.
  • Person aggrieved by any order or decision of Securities Appellate Tribunal can file an appeal to the Supreme Court.

Challenges Faced by SEBI

  • Concentration of powers: SEBI as a regulator fuses the three branches of the legislative, executive and judicial. This has created a tremendous concentration of power and financial firms fear to challenge the regulator.
  • Independent directors: The SEBI Board lacks a majority of independent directors, which could be a countervailing force.
  • Lack of detailed investigations:  Punishments are often being imposed without the basic process of an investigation and a hearing.
    • The punishment of stopping financial markets activity imposes high costs upon different firms.
    • The arbitrary power wielded in the executive and quasi-judicial functions at SEBI is inconsistent with a liberal democracy.
  • Stringent punishment: It can impose serious restraints on economic activity; this is done based on suspicion, leaving it to those affected to shoulder the burden of disproving the suspicion, somewhat like preventive detention.
  • Lack of proper regulations: Regulation, either rules or enforcement, is far from perfect, particularly in areas like insider trading.

Way Forward

  • Change in attitude: There is need of an attitudinal change, despite the fact that market contains large number of crooks, necessitating a crackdown and severe intervention.
    • The foremost objective of SEBI should be cleaning up the policy space in this area of the market.
  • Improve human resource: SEBI must give special attention to human resources and matters within the organization. SEBI must encourage lateral entry to draw the best talent.
  • Improving market intelligence: Enforcement can be strengthened with continuous monitoring and improving market intelligence.
  • India’s financial markets are still segmented. One regulator can’t be blamed for another’s failure when the remit over a financial product overlaps.
  • Unified financial regulator:  A unified financial regulator makes eminent sense to remove both overlap and excluded boundaries.

Sharing is caring!

Download your free content now!

Congratulations!

We have received your details!

We'll share General Studies Study Material on your E-mail Id.

Download your free content now!

We have already received your details!

We'll share General Studies Study Material on your E-mail Id.

Incorrect details? Fill the form again here

General Studies PDF

Thank You, Your details have been submitted we will get back to you.