The Bombay Stock Exchange of Mumbai was considered to be the largest stock exchange in India prior to the 1990s and before the establishment of SEBI, it used to regulate the stock market under the Capital Issues Control Act 1947, which was non-existent. Like today, the stock market did not run on electronic technology, every transaction was done on paper and there was a lot of sway by agents, which is still there today but has to follow strict rules.
There was no transparency in the stock exchange and only expert people knew the stock market and the people who used to invest used to see all the behavior through the stockbroker, like today, it is enough to get information about all the activities of the stock market at that time. It was a difficult job. Today we are going to talk about the Securities Exchange Board of India i.e. SEBI, which was established in 1988 and by the time of 1992, it was made as a competent regulator by making a law in the Parliament.
In what condition was SEBI established and what changes took place in the Indian stock market with the advent of SEBI and the establishment of the National Stock Exchange, the monopoly of the Bombay Stock Exchange was abolished. We will try to discuss many such points and the main objective of SEBI is to build the confidence of the people in the stock market and to increase the scope of investment, we will try to know about it in detail.
What is The Securities Exchange Board of India ? –
SEBI is an Indian stock market regulatory body that works to control all the activities of the stock market and to increase the confidence of the people to invest in the stock market, it works to provide the right facilities to the stock market and the investor. SEBI This organization is run by the Board of Members, which have been empowered by making laws in the Parliament.
The Chairman of SEBI is selected by the Central Government and the rest of the members are appointed on the advice of the Chairman. In this, one member from the Reserve Bank of India and two members through the Ministry of Finance and five members are appointed by the Central Government. The head office of SEBI has been established in Mumbai and its branches have been established in Ahmedabad, Kolkata, Chennai and Delhi, thereby maintaining decentralization of powers.
SEBI works to control all the activities of the stock market and to maintain the credibility of the people towards the stock market, all the companies have to submit all the documents under the strict rules of SEBI and all the rules have to be followed. Whatever steps have to be taken to promote the stock market, SEBI does what it takes to increase investment in the stock market. After the open economy of the 1990s, many policies were changed to increase foreign investment and investment was encouraged.
Background for SEBI –
India was in economic crisis in 1990 and a shortage of foreign exchange was created in India, which created problems for us to import. During this period, big scams started coming to the fore in the stock market, in which the biggest scam of Harshad Mehta came in front of the world. During this period, transparency about the stock market was rarely seen and every transaction took a long time to complete.
Due to the under-behavior, new investors were hesitant to enter the stock market and only certain people dominated the stock market. In the meantime, the Government of India made changes in its economic policies and opened the international market, due to which the accumulation of foreign exchange increased in India and due to the Indian stock market being linked to the Indian economy, steps were taken to improve it.
Before the changes in the stock market, the pre-independence law was applicable for the stock market, which was named Capital Issues Control Act 1947. Like today, digital technology was not used in the market and the buying and selling transactions took a long time to complete. In which money started being used in a wrong way and corruption was seen under it.
Because of which the investors of India were afraid to invest in the stock market. To replace this, the National Stock Exchange was established by the Government of India and the most important SEBI was established in 1988 and whose work started in the true sense from 1992.
Power of SEBI –
SEBI (Securities and Exchange Board of India) is the regulatory body that governs the securities market in India. It has been granted a wide range of powers to protect the interests of investors and ensure fair and transparent functioning of the securities market. Some of the key powers of SEBI are:
- Regulatory Powers: SEBI has the power to regulate and supervise the securities market, including stock exchanges, clearing corporations, depositories, brokers, and other intermediaries.
- Rule-making Powers: SEBI has the power to make rules, regulations, and guidelines relating to various aspects of the securities market, such as disclosure requirements, listing requirements, investor protection, and corporate governance.
- Enforcement Powers: SEBI has the power to investigate and enforce compliance with its regulations and orders. It can conduct inspections and audits, impose fines and penalties, and take legal action against violators.
- Powers to protect investors: SEBI has been granted powers to protect the interests of investors in the securities market. It can take measures to prevent fraudulent and unfair trade practices, and ensure that investors are provided with accurate and timely information about securities.
- Powers to supervise stock exchanges: SEBI has been granted powers to regulate and supervise the functioning of stock exchanges in India. It can oversee their operations, monitor their compliance with regulations, and take action against any violations.
- Powers to oversee corporate governance: SEBI has the power to oversee the corporate governance practices of listed companies, including the appointment of directors, the conduct of board meetings, and the disclosure of financial and other information.
Overall, SEBI plays a crucial role in maintaining the integrity of the securities market in India and protecting the interests of investors. Its wide-ranging powers help it to perform these functions effectively.
STRUCTURE OF SEBI –
SEBI (Securities and Exchange Board of India) is the regulatory body that governs the securities market in India. Its structure can be broadly divided into four main components:
- The Board: The Board is the top decision-making body of SEBI, comprising a Chairman, three whole-time members, and four part-time members appointed by the government. The Board is responsible for formulating policies, making regulations, and taking all major decisions related to the securities market.
- Departments: SEBI has several departments that are responsible for specific functions. These include the Legal Department, the Enforcement Department, the Market Regulation Department, the Investment Management Department, and the Economic and Policy Analysis Department, among others.
- Regional Offices: SEBI has regional offices located in major cities across India, such as Mumbai, Kolkata, Delhi, and Chennai. These offices are responsible for supervising and regulating the functioning of the securities market in their respective regions.
- Committees: SEBI appoints various committees to advise it on specific matters related to the securities market. These committees may be composed of experts from the industry, academia, and other relevant fields
Overall, SEBI’s structure is designed to ensure effective regulation and supervision of the securities market in India. The Board and the various departments work together to formulate policies, make regulations, and enforce compliance, while the regional offices and committees provide additional support and expertise in specific areas.
Objective of SEBI & Functions –
- The objective of setting up SEBI is to create a safe environment for the investors in the stock market.
Regulating and regulating all of the 17 stock markets that are run in India.
- Allowing all the new companies listed in the stock market to be listed in the stock market by examining it properly.
- If a company violates the rules of SEBI, then strict provisions like penalizing it and closing the stock market have been given by law.
- Monitoring and regulating illegal activities of the stock market by traders and stockbrokers to protect investors.
To attract foreign investors, win-win facilities can be made available to arrange and control it.
- To keep the small investor’s money safe, impose strict rules on big financial institutions and keep an eye on their activities.
- After the arrival of SEBI, there has been a lot of corruption in the stock market and today we get to see a very simple and safe investment platform for small investors because of SEBI.
- Due to the competition, the stockbroker sometimes wants to give such benefits to the customer, due to which both come in trouble, for this SEBI keeps an eye on such schemes and imposes restrictions.
- Today, through the Internet, information about stockbrokers and sub-brokers is available to us online, so that we can decide how to take our facilities from the broker.
- Many restrictions have been imposed by SEBI for trading under this, so that the small investor gets safety and the people associated with the company do not get the benefit of it.
- There is a deep relationship between India’s stock market and India’s economy, so SEBI is always ready for whatever rules it has to make for the development of India’s stock market.
- After the Satyam scam, many loopholes were filled by changing the law by SEBI so that the activities under the company should be monitored, so strict rules of transparency were made in the working of the company.
- A lot of control was put on the promoters of the company so that they could not harm the investor by abusing their rights.
Features of SEBI –
- SEBI This is known as the Securities Exchange Board of India.
- SEBI has been established on 12 April 1992 by making a law in the Parliament under the SEBI Act 1992.
- SEBI’s main office was set up at Bandra Kurla Complex, Mumbai, under which sub-branches have been constructed at Ahmedabad, Kolkata, Chennai and Delhi.
- The principal chairman of SEBI is appointed by the Government of India and the remaining 8 members are in this board.
- The Board of Directors is nominated by the Reserve Bank and two members are appointed by the Ministry of Finance.
- The rest of the members of SEBI are appointed by the Government of India.
- Prior to the establishment of SEBI, the stock market was regulated under the Capital Issues Control Act, 1947.
The objective of SEBI is to protect, develop and regulate the stock market etc.
- These important functions are performed by SEBI to audit and verify the companies.
- After the establishment of SEBI, the confidence of the people in the stock market increased and the number of investments increased.
- Under the open economic policy, foreign investment was encouraged to invest in India’s stock market and many strict rules were changed.
- SEBI has been given judicial, executive and rule making powers by making laws in the Parliament.
Critical Analysis of SEBI –
- The original purpose of setting up SEBI was to create transparency in the stock market, but even after many scams we got to see in which Satyam computer scam is seen.
- Many efforts were made by SEBI to increase the evidence of foreign exchange in India’s stock market, but till date, the amount of foreign investment that should have increased has not been successful.
- Many rules were made to crack down on the activities under the company, but even today the news of the company is used for some investors, it is true.
- Small investors are seen growing up today, but the information they should have about the stock market is not available to them, but their investments are used by misleading information.
- In India’s stock market, even today, investors are encouraged to trade more than an investment, which is an illusion, it does not get SEBI’s attention.
- SEBI seems to be somewhat unsuccessful in controlling the misleading news that is spread about the company in the stock market.
- Technology is used on a large scale by large financial institutions in trading, in front of which small traders are unable to survive and become insolvent, SEBI should keep an eye on it.
- Due to the family-oriented business mindset, the evidence of listed companies in India’s stock market does not increase, for this, the awareness that should be made, SEBI has failed till date.
- Even today, 80% of small businessmen in India prefer to do business at the proprietorship or partnership level, for which SEBI will have to work.
In this way we have tried to get information about SEBI and how much impact we get to see on the stock market of India, we have tried to know. We have tried to analyze how the purpose for which SEBI was established by the Parliament of India has been fulfilled. What are the functions of SEBI and what are the important functions performed by SEBI, we have tried to know about it here.
Prior to the establishment of SEBI, there was very little government interference in the stock market of India, due to which certain people get control over the stock market. These concentrated powers were decentralized by the central government and regulatory bodies were created by SEBI in Delhi, Ahmedabad, Chennai and Kolkata to control all the stock markets.
Even after the establishment of SEBI, we get to see many scams, which have damaged the credibility of India, after this many reforms were done by the central government in the stock market of India. SEBI was further enabled, as a result of which we see today that the evidence of investing in the stock market of India has increased from the last few years, which is a sign of increasing the credibility of India’s stock market.