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Let’s look at the various functions of SEBI.
What is SEBI?
SEBI or the Securities and Exchange Board of India is a designated body which regulates the markets of India when it comes to investment and finance. It is very important for the market of a country to be a stable ground of investment, which is pivotal for the economic growth of the country and this is what SEBI ensures. The main functions of SEBI include the designing and meting out certain rules and regulations, which in turn will make the market a safe place for investment. Suppose you are thinking of launching a new Mutual Fund Investment plan in the market, then you will have to first get the green signal from SEBI. They will determine whether or not your plan is in sync with the rules and regulations that are in place and then only will they allow your plan to get a legal sanction in the investment and financial market of India. This organization was first established as early as 1988 but it was only on the 12th of April, 1992 that the Securities and Exchange Board of India Act, 1992 was passed with which SEBI legally became a regulatory unit.
The important functions of SEBI
There are a lot of important functions that SEBI has to perform in order to ensure a smooth operation of the Indian investment market. In order to understand the plethora of functions that they are entrusted with, functions of SEBI can be broadly divided into three categories, namely, Regulatory functions, Developmental functions and Protective funcions.
The Regulatory functions of SEBI
The main regulatory functions of SEBI revolve around the effective management of the stock market. The various regulatory functions that this organization is entrusted with are:
Every mutual fund or investment plan, before being introduced into the market is to be regulated by this body Brokers, merchant bankers are intermediaries that operate in the stock market. But there is a code of conduct and certain rules and regulations that they need to abide by and these rules have been structured, framed and put into place by SEBI Private placement often leads to various discrepancies because of which certain regulatory measures have been put in place by SEBI, that regulates such operations If you are associated with stock exchange in any manner, for example, you might be a share transfer agent, a stockbroker etc, you will then have to be registered with SEBI and this body will regulate your functions One of the main functions of Sebi is to oversee the process when one company takes over another one The audit and inquiries of various stock exchanges are also part of SEBI’s function
The Developmental functions of SEBI Let us take a look at some of the developmental functions that SEBI performs:
If you are being trained to become an intermediate in the investment market in India, then your train will be promoted by SEBI. One of the most important developmental features of this body is that stockbrokers who are registered can now trade through the internet.If going through the stock exchange then an initial offer made by the public on the primary market is also permissible. The expense of issue is a huge one and hence in order to reduce it, underwriting has become optional.
Protective functions of SEBI These are one of the most important functions of SEBI. These include:
Making sure that no kind of insider trading is allowed. Now, who is an insider? Suppose someone invests or buys stocks of a particular company and is in some way associated with it- like the worker of the company, one of the Board of directors etc. These people might or might not have knowledge of the security and the future plans of the company. When one knows such important data it becomes really easy for people to invest and reap benefits from it which are strictly personal in nature. This creates an unfair and unstable situation of the investment market and hence it is SEBI’s task to ensure that no insider trading takes place. Price rigging is an illegal offense and stopping a company from doing it, is one of the primary functions of Sebi. Sometimes the company in order to gain high profits, inflate their prices through artificial means and thus the consumer or the investor gets cheated of funds. This is called price rigging and in order to ensure a fraudulent free market, SEBI makes sure that price rigging is curtailed as much as possible. Unfair trade practices are something that needs to be checked and SEBI has been entrusted with the duty to do so. It is very important to make the investors aware of fraudulent practices and hence SEBI educates them. The interest of many debenture holders needs to be protected and that is what SEBI does with a book of strict guidelines. Previously preferential shares which were not related to the prices of the market could be allotted. This has been prohibited by SEBI. Another one of the most important functions of SEBI is that if one is caught on the charges of insider trading, then one is liable to be punished and fined by SEBI.
General functions of SEBI
Apart from these SEBI also performs certain functions like regulating and taking up the task of promoting organizations that are self-regularized. It can also call for information on any bank or information if so needed. They can conduct audits and inquiries as well as and when they deem fit, in case any discrepancy has been spotted.
WIth discahrge of these functions SEBI has been considered one of the most impartial and effective government agencies. More strenghthening of it's powers will further strengthen the capital markets.
By: Priyank Kishore ProfileResourcesReport error
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