SEBI, Securities and Exchange Board of India, is the country’s statutory authority for monitoring and regulating Indian securities and capital. SEBI formulates regulations and guidelines to protect the interests of investors. In compliance with the Securities and Exchange Board of India Act, 1992, it was established on April 12, 1992, Working toward one mission: protecting investors’ interests in securities, developing, regulating the securities market, and matters connected with or incidental it.
Structure of SEBI
The SEBI is composed of about 20 departments. These departments include corporation finance, economics and policy analysis, debt and hybrid securities, enforcement, human resources, investment management, commodity derivatives market regulation, and legal affairs, among others.
Primary Functions of SEBI
It protects the interests of investors and promotes the development of the securities market. The SEBI works to structure and regulate the activities of stockbrokers, sub-brokers, investment advisers, share transfer agents, bankers, merchant bankers, trustees of trust deeds, registrars, underwriters, and all other related individuals. It also regulates depository institutions, participants, custodians of securities, foreign portfolio investors, and credit rating agencies.
It ensures that investors are educated, prohibits insider trading, monitors substantial shares acquisitions, and takes over companies.
Authority and Power of SEBI
Besides providing strategic guidance to the Company and the Group and overseeing business activities, the Board of Directors also plays an important role in leadership.SEBI has three main powers. They are;
Quasi-Judicial: SEBI ensures fairness, transparency, and accountability by delivering judgments regarding any type of fraud or unethical practice in the securities market. It includes the drafting of the legislature about the Capital Markets.
Quasi-Executive: SEBI is tasked with enforcing the rules, awarding judgments, and suing violators. The commission is also authorized to examine books of accounts and other documents if it finds any violations of the regulations.
Quasi-Legislative: The SEBI retains the right to frame rules and regulations to protect the interests of investors. They are intended to prevent malpractice. Even with the powers of SEBI, the results of its functions must still go through the Securities Appellate Tribunal and the Supreme Court of India.
Mutual Fund Regulations by SEBI
The SEBI has laid down the following regulations for mutual funds;
- A group company that includes the asset management company cannot hold more than 10% of shares and voting rights in the asset management company.
- In a mutual fund, no shareholder can own more than 10% of the assets management company.
- No stock can weigh more than 35%; for other indices, the limit is 25%.
- An index cannot have more than 65% combined weight of its top three constituents.
- SEBI must be notified before new funds are launched of their compliance status.
- SEBI recommends that mark-to-market methodology is also used for evaluating debt and money market instruments
- If an investor exits a liquid scheme within seven days, an exit penalty will be imposed.
