‘SEBI (Security & Exchange Board of India)’ If you are in the finance and stock market you are aware of this word. In this article, we will see it’s functions, entities, roles, and responsibility. Also, we will see how you can complain to SEBI.

What is SEBI?

Security & Exchange Board of India (SEBI) is the core government body to regulate Indian Security Market (Stock Market).  For example, I can say that you all aware of the Reserve Bank of India who is the regulator of the entire banking system in India the same way SEBI works for the Indian Stock Market.

Why SEBI Originated?

In India, from 1980 to 1990 there were huge unethical practices and immoral fraud came out in the Indian stock market. Furthermore, Every one greedy to earn more money from the equity market and find plenty of loopholes in the system. Due to that, the following frauds happen to like,

• Insider trading
• Delay in making delivery of shares
• Price rigging
• Unofficial private placement
• Unethical trade activity by a broker, And many more

Due to that majority of profit cover by company promoter and broker, as a result to that retail investors lose their money in the market and no authority to listen to the grievance.

As this time, the Union government of India noticed this decreased in volume, transaction, and trust of retail investors and traders from the equity market.  In 1988, the Indian government decides to establish one body to control all that malpractice and design SEBI.

History of SEBI

It was established in 1988 with a primary role at that time was to observe the market but no power to control anything and work as a non-statutory body. Due to that, there was no drastic change seen in the unethical practice of broker and company promoter.

In the year 1992, the union government of India passed the SEBI act 1992. On 12 April 1992, with all the statutory power it becomes an autonomous body to control all the activity of the entire Indian financial market.

Location of SEBI in India

• SEBI has it’s headquarter located at Bandra Kurla in Mumbai, Maharashtra.
• There are 4 regional offices located in Ahmedabad, Chennai, Kolkata, and New Delhi.
• The local offices are located in different cities like Bangalore, Bhubaneswar, Chandigarh, Guwahati, Jaipur, Kochi and Patna

Board Members of SEBI

There are total 9 board members in SEBI.

One of them is the Chairman who is appointed by the Union Government of India. Mr. Ajay Tyagi is the current chairman of SEBI appointed on 10^th January 2017.

Two members appointed by the Union Finance Ministry. One member from the Reserve Bank of India (RBI) and the Union Government of India appoints the remaining five members.

Out of nine, four are whole-time members and another four are part-time members of the board under the SEBI Act 1992.

Key Responsibility of SEBI

Following are the responsibility perform by SEBI.

• Prevent malpractice in Indian Finance market by anybody like brokers, company promoters, traders, investors, merchant banker, and all that, that are directly or indirectly connected to it.

• It is made to protect the interest of traders and investors in the market by providing transparent and quality platforms and raise funds from the financial market.

• Listening and providing a support system for investor grievances.

• To create and enforce laws for corporates and financial intermediaries in the financial market (brokers, Mutual fund AMCs, depository, stock exchanges, and so on.)

• Promoting and developing the Indian financial market.

Entities of SEBI in Financial Market

Following are the entities (intermediates) of SEBI

The Issuer of Securities (Promoter of the Company)

These are the corporate entities that list their shares on stock exchange and raise fund from retail investor and other financial institutes.

SEBI takes care that the issuer of IPOs and FPOs can take place in a transparent and healthy environment.

Retail Investor (Trades and Investors)

We can say that retail investors are the end-users of the stock market and most of the chances have become a victim of any unethical practices and fraud in the financial market.

SEBI is responsible to prevent trader and investors from that kind of immoral activity and maintain their trust and interest in the stock market.

Financial Intermediaries (Brokers and Sub-brokers)

The presence of financial intermediaries is very important in the Indian security market. They play a very vital role in this cycle and ensure that stock market transaction takes place in a smooth and secure manner because the end-user(retail investor) widely depend on brokers and sub-brokers.

So, SEBI monitor all the activities of these intermediaries.

Also Read: 6 Different charges & taxes you pay with your brokerage

Functions of SEBI

Functions of SEBI divided in 3 different parts. All are mention bellow.

(1)Proactive Functions:

The foremost priority of SEBI is to provide a safe and transparent environment to the retail investor, who make financial market alive due to that SEBI perform following Proactive Functions:

Prevention of Price Rigging:

Price fluctuation of stocks and index is very essential in the stock market. Based on that traders and investors make money from the stock market.

However, sometimes sudden fluctuations are fixed by any corporate body or institution to make a huge profit. Such fixed fluctuation is called Price Rigging/Price Fixing.

This price rigging action leads to a huge loss for retail traders and investors.

SEBI keeps strict surveillance to prevent such price rigging and introduce circuits. This circuit is known as the upper circuit and lower circuit for stocks and indexes.

Prevention of Insider Trading:

As we all know that insider trading is a very big crime in the security market performs by any company promoter, institution or employees of the company.

In this case, earlier mention party aware with the company’s inside news which affects share price in the coming days and buys or sells the company’s share in very large quantity and tries to earn huge profit from this price rigging. Such a practice know as Insider Trading

To prevent insider trading SEBI has banned listed company’s board members, promoters and employees to purchase their own shares from the secondary market (open market).

SEBI also asked listed company’s promoters, board members and employees to disclose their holding on a certain given timeframe.

Awareness for investors:

SEBI conducts various online and offline financial awareness programs for investors and traders.

This seminar contains topics from basic to advanced levels such as financial securities, rules, and regulation of trading and investing in the stock market, money management rules, and many others.

Also Read: 30+ Basic Stock Market Terms Every Beginner Should Know

SEBI guidelines for intermediaries:

SEBI declares different guidelines for intermediaries like stockbrokers, sub-brokers, merchant bankers, and other entities.

All these intermediaries have to work according to that guidelines and SEBI conducts audits from time to time to check that.

(2) Regulatory Functions:

Using regulatory functions SEBI watches the working patterns of intermediaries of the financial market.

This ensures that the stock market runs a smooth and transparent manner. Regulatory functions include-

• SEBI designed different guidelines and codes of conduct. Financial intermediaries and corporate bodies follow all that guidelines and codes of conduct.

• SEBI registers all the entities like brokers, share transfer agents, trustees, merchant bankers, credit rating agencies, depositories, and many more who are associated with the stock exchange in any manner.

• Conduct inquiries and audits of exchanges. Also, impose different fees on the capital market participants.

• SEBI regulates the takeover of companies and also registers the functioning of the Asset Management Company.

(3) Development Functions:

SEBI is responsible to develop different functionality. As a result of that, all that intermediaries of the market actively take part and work according to rules and regulations.

This functionality includes following but not limited to this only

• Online platform for secure transactions in the financial market.
• Introduction of Discount brokers.
• Buying and selling of mutual fund directly from AMC or through a broker.
• A smooth way to apply for IPO and listing process of it.

Sebi COmplaint  REdress System (SCORES)

If you have any complaint against any listed company, intermediary registered with SEBI, of course, you can complain against them.

To do that, your 1^st approach to complaint to concerned company/ intermediary directly and try to solve your query.

However, If you are not satisfied with their response. You could go to SCORES and register for your complaint. Also, you can contact to toll-free number helpline number of SEBI that is 1800 22 7575

So, Dear readers, we have seen about SEBI, It’s history, functions, entities, and responsibility. At last, we have seen how to complain to it. All this you have found in very simple language

Frequently Ask Question (FAQ)

Now we want to hear from you:

You are free to give comments regarding this article in the below comment section. Your views are very valuable to us.