A New India
Chapter 182 - 182: Blueprint of SEBI - I

Rohan sat in his office, late into the night, surrounded by stacks of papers and documents.

His mind was sharp, despite the fatigue setting in from the long days of planning and decision-making.

It was becoming increasingly clear to him that India's stock markets needed a body capable of regulating and protecting the financial infrastructure.

The Bombay Stock Exchange (BSE) had grown exponentially, particularly after the success of the LIC auction that had raised a stunning $5 billion.

Investors, both Indian and foreign, were pouring money into the markets.

But with this growth came concerns.

Market manipulation, insider trading, and unethical practices were becoming rampant, and Rohan knew that without proper oversight, the entire financial system could collapse under the weight of its own success.

Rohan leaned back in his chair, staring at the half-written document on his desk.

The idea of creating a Securities and Exchange Board of India (SEBI) had been stirring in his mind for weeks.

He had seen the importance of regulatory bodies in his last life.

The creation of such a body in India would be revolutionary, an organization to regulate stock exchanges, protect investors, and maintain the transparency of the markets.

With the auction money safely secured and the DRDO, HAL, and other defense initiatives well underway.

Rohan knew it was time to focus on the country's financial markets.

He had to create SEBI, and it had to happen soon.

The blueprint he was working on would become the foundation of India's modern securities market.

Rohan picked up his pen and began drafting the key points for SEBI.

He knew that the Economic Advisory Council would challenge him on every detail, so everything had to be perfect.

This was not just a plan; it was the beginning of a new era for India's financial system.

Blueprint of SEBI (Securities and Exchange Board of India): Powers and Structure

1. Objectives of SEBI

Investor Protection: Safeguard the interests of investors in securities and promote a fair trading environment.

Market Regulation: Regulate stock exchanges, securities markets, and intermediaries like brokers, underwriters, and other associated institutions.

Development: Promote and develop securities markets by providing training to intermediaries and encouraging market research.

Prevention of Malpractices: Prevent fraudulent and unfair trade practices related to the securities market.

Education: Spread investor education and awareness programs about market functions and securities trading.

2. Powers of SEBI

a. Quasi-Legislative Powers

SEBI has the authority to draft regulations to govern securities markets. These regulations have the force of law and must be adhered to by all market participants.

Example: Insider Trading Regulations, Listing Obligations and Disclosure Requirements, and Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations.

b. Quasi-Judicial Powers

SEBI has the authority to investigate and adjudicate securities-related issues. It can pass orders, impose penalties, and even ban individuals or companies from participating in the market.

Example: SEBI has penalized numerous entities for insider trading and market manipulation.

c. Quasi-Executive Powers

SEBI enforces regulations and takes actions such as conducting inspections, inquiries, audits, and surveillance to ensure market participants comply with rules.

Example: SEBI can initiate investigations, summon individuals, and search premises to gather evidence on violations of regulations.

d. Power to Impose Penalties

SEBI can impose financial penalties for violations such as non-compliance with SEBI regulations, insider trading, and fraudulent activities.

Example: SEBI fined multiple firms for failing to comply with the disclosure norms and for manipulating stock prices.

e. Power to Regulate Stock Exchanges

SEBI has oversight over all stock exchanges in India, including the power to regulate their functioning, impose restrictions, and close down exchanges that fail to adhere to regulations.

Example: SEBI regulates both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) under its oversight authority.

f. Power of Investigation and Enforcement

SEBI can conduct investigations into suspected violations of securities laws, order inspections, audits, or freeze assets of entities under investigation.

Example: SEBI investigated several companies for stock price manipulation and irregularities in IPO allocations.

g. Power to Issue Guidelines

SEBI regularly issues guidelines for different stakeholders in the securities market including issuers of securities, intermediaries, mutual funds, and portfolio managers.

Example: SEBI sets guidelines for the listing of companies, investor protection measures, and mutual fund regulations.

h. Power to Approve By-Laws

SEBI has the authority to approve by-laws for stock exchanges and various intermediaries to ensure efficient market functioning.

Example: SEBI approved the by-laws of the National Stock Exchange, ensuring compliance with best practices.

3. Structure of SEBI

a. Board of SEBI SEBI's governance structure consists of a Board with members appointed by the Indian government. It consists of:

Chairman: Appointed by the government of India.

Two Members: Officers from the Ministry of Finance.

One Member: From the Reserve Bank of India (RBI).

Five Members: Nominated by the Government of India from different fields such as law, finance, accounting, and capital markets.

b. Advisory Committees SEBI has several advisory committees to assist in framing policies and ensuring efficient market regulation. These committees consist of experts and stakeholders from various sectors:

Primary Market Advisory Committee (PMAC): Focuses on regulating and developing the primary securities market.

Secondary Market Advisory Committee (SMAC): Advises on policies for the secondary market, stock exchanges, and trading.

Mutual Fund Advisory Committee: Provides guidance on regulatory matters related to mutual funds.

c. Organizational Divisions SEBI's operations are divided into several divisions, each responsible for specific areas of the securities market:

Market Regulation Department (MRD): Regulates stock exchanges and trading platforms.

Corporate Finance Department (CFD): Oversees corporate disclosures, IPO processes, and mergers.

Enforcement Department (ED): Handles investigations, enforcement actions, and penalties.

Investment Management Department (IMD): Supervises mutual funds, portfolio managers, and venture capital funds.

Integrated Surveillance Department (ISD): Monitors market activities for manipulation and insider trading.

Legal Affairs Department (LAD): Handles legal issues, including court cases and drafting regulations.

d. Regional and Local Offices SEBI operates through regional and local offices to ensure it has a strong presence across the country and can enforce its regulations more effectively. These offices facilitate investor awareness programs, inspections, and investor grievances redressal.

Head Office: Mumbai.

Regional Offices: Located in major cities like Delhi, Kolkata, Chennai, and Ahmedabad.(For Future Reference)

4. Functions and Responsibilities of SEBI

a. Regulation of Stock Exchanges and Securities Markets.

SEBI ensures that stock exchanges operate fairly and efficiently, regulates market intermediaries (brokers, depositories, clearing corporations), and maintains transparency in securities trading.

b. Regulating Mutual Funds and Collective Investment Schemes.

SEBI regulates mutual funds, ensuring that they operate with transparency, fairness, and follow a standard set of rules to protect investors' interests. It mandates disclosures, fair valuations, and risk management practices.

c. Prevention of Insider Trading and Fraud.

SEBI actively prevents insider trading by enforcing stringent laws, conducting surveillance, and taking action against entities found guilty of such practices.

d. Investor Protection and Education

SEBI runs investor awareness programs, publishes guidelines to protect investor interests, and ensures that companies provide accurate information to investors.

e. Development of Securities Market.

SEBI promotes the development of new financial instruments, such as derivatives, and encourages technological advancements in trading platforms to improve market efficiency.