The Securities and Exchange Board of India was established in 1988 in order to encourage an orderly and healthy growth of the securities market. SEBI was set with an overall objective of investor protection and to promote the development and regulation of the functions of the securities market. The following are the listed objectives.
(i) Regulation: The main objective of SEBI was to regulate the functioning of the stock exchange and the securities market. It aims at providing a place where the issuers of securities (i.e. companies) can raise funds in an easy and confident manner.
(ii) Protection: SEBI educates the investors by providing them valuable information regarding various securities and companies. It provides them with the guidelines related to efficient investment. It provides them adequate and reliable information about the companies and thereby, helps them in taking wise and informed investment decisions.
(iii) Prevention: To combat the malpractice in trading of securities was the basic reason for the establishment of SEBI. Malpractice such as insider trading, violation of rules and regulations, non-adherence to Companies Act, etc. erodes the confidence of investors. SEBI aims at checking these malpractices by creating a balance between the self-regulation of a business and the legal statutory regulations.
(iv) Code of Conduct: Through efficient regulation, SEBI aims at developing a code of conduct for fair trade practices by intermediaries such as brokers, merchant bankers, underwriters, etc. This helps in making them competitive and professional.
To attain the aforementioned objectives, SEBI perform 3 main functions namely, Regulatory, Development and Protective functions. The following are the functions performed by SEBI.
(i) Regulatory Functions:
· Registration: One of the regulatory functions performed by SEBI is the registration of the brokers, sub-brokers, agents and other players in the market. Registration of collective mutual schemes and Mutual Funds is also done by SEBI.
· Regulating the Work: SEBI regulates the working of the stock brokers, underwriters, merchant bankers and other market intermediaries. It frames rules and regulations for the working of the intermediaries. SEBI also regulates the takeover bids by the companies. It conducts regular enquires and audits of stock exchange and intermediaries.
· Regulation by Legislation: SEBI performs and exercise various other powers which are delegated by the Government of India under the Securities Contracts (Regulation) Act, 1956. Besides, it levies fee or other charges for carrying out the purposes of the Act.
(ii) Development Functions:
· Training: SEBI promotes the training and development of the intermediaries of the securities market in order to promote healthy growth of the securities market.
· Research: By conducting research in the required and important areas of the securities market, SEBI publishes useful information. This helps the investors and other market players to make wise investment decisions.
· Flexible Approach: SEBI has adopted a flexible and adaptive approach such permitting internet trading, IPOs, etc. Such measures promote the development of capital market.
(iii) Protective Functions:
· Prohibition: SEBI prohibits fraudulent and unfair trade practices. It prevents the spreading of misleading and manipulative statements which are likely to affect the working of the securities market. SEBI educates the investors by providing them valuable information regarding various securities and companies so as to enable them to make wise investment decisions.
· Checks on Insider Trading: Insider trading refers to a situation where an individual connected with the company leaks out crucial information regarding the company. Such information may adversely affect its share prices. SEBI keeps a strict check on such insider trading.
· Promotion and Protection: SEBI encourage fair trade practices and promotes a code of conduct for the intermediaries. It undertakes step for investor protection and education. It also checks the manipulation of price of securities.
