Introduction

In this article you will know about "SEBI -Its Full Form, Objectives And Functions", but first of all lets talk about what is SEBI. SEBI stands for Securities and Exchange Board of India. It was set up in 1988 to regulate the functions of securities market. SEBI promotes orderly and healthy development in the stock market but but initially SEBI was not able to exercise complete control over the stock market transactions. It was left as a watch dog to observe the activities but was found ineffective in regulating and controlling them. As a result in May 1992,SEBI was granted legal status. SEBI is a body corporate having a separate legal existence and perpetual succession. 

Reasons for establishment of SEBI

With the growth in the dealings if stoch markets, lot of malpractices also started in stock markets such as price rigging, unofficial premium on new issue, delay in delivery of shares, violation of rules and regulations of stock exchange and listing requirements. Due to these malpractices the customers started losing confidence and faith in the stock exchange. So government of India decided to set up an agency or regulatory body known as Securities and Exchange Board of India ( SEBI). 



Purpose and role of SEBI 

SEBI was set up with the main purpose of keeping a check on malpractices and protect the interest of investors. It was set up to meet the needs of three groups:-

1. Issuers:- For issuers it provides a market place in which they can raise finance fairly and easily. 

2. Investors:- For investors it provides protection and supply of accurate and correct information. 

3. Intermediaries:- For intermediaries it provides a competitive professional market. 

Objectives of SEBI

The overall objectives of SEBI are to protect the interest of investors and to promote the development of stock exchange and to regulate the activities of stock market. The objectives of SEBI are:-

  • To regulate the activities of stock exchange. 
  • To protect the rights of investors and ensuring safety to their investment. 
  • To prevent fraudulent and malpractices by having balance between self regulation of business and its statutory regulations. 
  • To regulate and develop a code of conduct for intermediaries such as brokers, underwriters, etc. 

Functions of SEBI 

The SEBI performs functions to meet its objectives. To meet three objectives SEBI has three important functions. Theses are :-

1. Protective Functions :- 

These functions are performed by SEBI to protect the interest of investor and provide safety of investment. As protective functions SEBI performs following functions:

(i) check a price rigging : price rigging refers to manipulating the prices of securities with the main objective of inflating or depressing the market price of securities. SEBI prohibits such practice because this can defraud and cheat the investors. 

(ii) It prohibits insider trading: Insider is any person connected with the company such as directors, promoters, etc. These insiders have sensitive information which affects the prices of the securities. This information is not available to people at large but the insiders get this information by working inside the company and if they use this information to make profit, then it is known as insider trading. SEBI keeps a strict check when insiders are buying securities of the company and takes strict action on insider trading. 

(iii) SEBI prohibits fraudulent and unfair trade practices: SEBI does not allow the companies to make misleading statements which are likely to induce the sale or purchase of securities by any other person. 

2. Developmental Functions:-

These functions are performed by the SEBI to promote and develop activities in stock exchange and increase the business in stock exchange. Under developmental categories following functions are performed by SEBI :

(i) SEBI promotes training of intermediaries of the securities market. 

(ii) SEBI tries to promote activities of stock exchange by adopting flexible and adoptable approach in following way :-
  • SEBI has permitted internet trading through registered stock brokers. 
  • SEBI has made underwriting optional to reduce the cost of issue. 
  • Even initial public offer of primary market is permitted through stock exchange. 

3. Regulatory Functions:- 

These functions are performed by SEBI to regulate the business in stock exchange. To regulate the activities of stock exchange following functions are performed:

(i) SEBI has framed rules and regulations and a code of conduct to regulate the intermediaries such as merchant bankers, brokers, Underwriters etc. 

(ii) SEBI registers and regulates the working of stock brokers, sub- brokers, share transfer agents, trustees, merchant bankers and all those who are associated with stock exchange in any manner. 

(iii) SEBI registers and regulates the working of mutual funds, etc. 


Frequently Asked Questions 

Question 1. Who created SEBI? 

The securities and Exchange Board of India was constituted as a non- statutory body on April 12,1988 through a resolution of the Government of India. 

Question 2. Who is the CEO of SEBI? 

Madhabi Puri Buch is the chairperson of the securities and exchange board of India (SEBI) . 

Question 3. Where is the headquarter of SEBI? 

SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai. 

Question 4. What is the functions of SEBI? 

SEBI performs major three functions :
  • Protective Function
  • Regulatory Function
  • Development Function