Role of SEBI in Capital Market


Meaning of SEBI

Securities Exchange Board of India (SEBI) is the regulating body of securities markets in India. It is a body established by the government of India for monitoring and controlling all matters concerned with the security market. SEBI was established on April 12, 1988, and got statutory powers on April 12, 1992, through SEBI act, 1992. It is headquartered at Mumbai with its regional offices in Kolkata, Chennai, New Delhi and Ahmedabad.

The whole working of SEBI is managed by 6 members: One person nominated by Central Government, Two officers of central ministries, one member from RBI and remaining two nominated by Central Government. SEBI acts as a watchdog for Indian capital market and monitors all its functions to safeguard the interest of its shareholder. SEBI issues guidelines for the Indian capital market and aims at removing all fraudulent and malpractices from securities trading.

SEBI strictly prohibits insider trading from the capital market. It is responsible for registration and regulation of intermediaries like Share transfer agent, Sub brokers and Stockbrokers working with capital market. It has full right to inspect the books and accounts of financial intermediaries involved in trading. SEBI is also concerned with educating of investors and training of the financial intermediaries for better functioning of the capital market. Roles of SEBI in Indian Capital Market are as follows:

Role of SEBI in Capital Market

Regulates Capital Market

SEBI is a regulating body for the capital market in India. It is set up by the government of India and act as a watchdog for the capital market. It issues guidelines for the functioning of stock exchanges and aims at reducing all malpractices from the trading world. It avoids all speculative activities and insider trading from securities trading business. 

Regulation and Registration of Financial Intermediaries

Financial Intermediaries working with stock exchanges and involved in trading business are registered by SEBI. SEBI regulates the functioning of all financial intermediaries like stockbroker, share transfer-agent, Portfolio managers, Underwriters, Trustees, Merchant bankers, sub-broker etc. All these intermediaries work as per the instructions of SEBI.

Educates Investors and Trains Intermediaries

SEBI provides full detail guidelines to its investors to increase their investing knowledge. It educates them regarding all investment issues so that they can protect themselves from malpractices. It makes its investors fully aware of all affairs concerned with trading activities. SEBI also provides time to time training to financial intermediaries for better functioning and serving investors well. It aims at improving their understanding with people.

Audit Stock Market Performance

SEBI has full power and right to check the account and books of stock exchanges working in India. Stock exchanges are required to show their book of account to SEBI whenever required by it. It aims at bringing transparency in trading activities to protect its investor’s interest.

Control Merger, Takeover and Acquisition of Companies

SEBI keep an eye and fully regulates all merger, acquisition and takeover activities. It aims at removing and reducing all fraud activities from the Indian capital market. With the aim of creating a monopoly in the capital market, many big companies want to buy and merge with different companies. SEBI avoids all such mergers and acquisition activities and checks whether it is done for development purposes.

Better Relationship with ICAI

SEBI aims at bringing the transparency in auditing work of businesses. For this, it maintains good understanding with ICAI, the authority for making auditors in India. SEBI along with ICAI investigates whether all charted accountants are doing their job properly.

Financial statements are termed as a mirror to see the real face of companies. Investors can get full detail by just analysing these statements. SEBI thereby ensures that whether these statements are prepared correctly by keeping an eye over charted accountant’s duty.

Evaluate Portfolio Management Activities

SEBI in order to check the capital market performance evaluates report of portfolio management activities from time to time. It demands a performance report from all registered portfolio managers in India by sending a letter to them. This helps in evaluating and regulating capital market performance in India.