SEBI - Everything You Should Know About The Stock Market Regulator

In the Indian stock market, there are transactions of crores taking place every day. Have you ever wondered how all these are kept in check? It is by SEBI, the stock market regulator in India. In this article, we will read about SEBI in detail, its role in the stock market, its objective and a lot more. As an investor, it is important to be aware of the SEBI guidelines, and new regulations coming in and thus we have also included these pieces of information for you. So, let’s begin!

What is SEBI in Stock Market?

Securities and Exchange Board of India (SEBI) came into existence in the year 1992. The government of India established this organisation to regulate the stock market. It has its headquarters in Mumbai, and regional centres in other major cities like New Delhi, Chennai, Kolkata, Bengaluru, Hyderabad, Lucknow, Jaipur, Ahmedabad, Shimla and Kochi.

SEBI has been mentioned as the regulatory authority of the capital market in India by Section 3 of the SEBI Act, 1992. The pivotal role of SEBI is to protect the interest of the investors who are investing in the securities. Other than this, SEBI also has the duty of promoting development in the securities market, regulating it, and related matters.

Why SEBI is important?

The existence of SEBI is crucial for the entire securities market and investors. In the 70s and 80s, when SEBI wasn’t there, multiple frauds such as insider trading, market manipulation, unofficial private placements, and legit brokers taking advantage of innocent investors were at their peak. To control this mess, and regulate the entire market, the government decided to establish SEBI and this is how SEBI came into existence and is important for every investor’s rights and safety.

Powers of SEBI

SEBI has been vested with certain powers which are as follows –

• Quasi-Judicial: Any fraud or unfair activity taking place in the stock market is reported to the SEBI, and it has all the rights and authority to make a judgement about the scenario.
• Quasi-Legislative: SEBI has the sole power to decide the guidelines for the securities market and stock market players such as NSE, BSE, CDSL, NSDL and others. Whether it is trading guidelines, listing requirements, or disclosure criteria, all are decided by SEBI.
• Quasi-Executive: Thirdly, SEBI is vested with executive powers as well. The rules and regulations framed to safeguard the interest of the investors need to be executed correctly, and SEBI has the sole power of doing that. The institution has the right and authority to take legal action against people and companies or anyone violating these rules and regulations.

Functions of SEBI

Now after the powers of SEBI, let's see the functions of the stock market regulator.

While the primary function of SEBI is to protect the investors’ interest in the securities market, here are other functions that it has –

• It takes care of different developments in the stock market.
• It regulates depositories, credit card rating participants, custodians of securities, stock exchanges such as NSE and BSE, and foreign portfolio investors.
• SEBI make sure there is no unfair activity in the market such as insider trading, manipulation of stock prices and others.
• SEBI also regulates mergers and acquisitions of different companies.
• SEBI regulates the operations of the stock market.
• It decides the role of stock brokers, sub-brokers, agents, and Authorised persons in the market.
• It decides the maximum brokerage that brokers can charge and also monitor their operations.
• It makes sure that the market functions smoothly and investors have no grievances.
• Finally, it helps all the investors and general people be aware of happenings in the market and also educates them by providing different online and offline resources about trading, investments, markets and related things.

Guidelines of SEBI

The guidelines by SEBI which are mandatory for every market participant to adhere are –

• Investors shouldn’t invest in or trade unlisted companies. Unlisted companies are those companies which do not have their shares listed on any stock exchange, basically private companies.
• Investors will not be allowed to trade in the market if they do not have a PAN and AADHAAR card and legitimate bank account details.
• Investors cannot deal in the grey market.
• Without a Demat account, no one can trade in the Indian share market.
• The minimum age of an individual investor needs to be 18 years or above.

SEBI New Rules and Regulations

While there are new regulations that keep coming from SEBI, here are a few from the month of June 2023.

• SEBI approved stricter rules related to disclosure for the FPIs. This is to safeguard the interest of the investors and for discouraging the illegitimate use of overseas investment channels.
• New compliance rules are out for REITs and InvITs. Now they need to disclose the names of investment managers, along with the name of committee members, board members, directors and others related to the decision-making in these companies.

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