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SEBI stands for the Securities and Exchange Board of India. SEBI was established in 1988. When it was first established, it did not exercise a lot of duties or responsibilities over anything in general. However, due to certain circumstances in 1992, SEBI was established as an independent body that could exercise a lot of rights and control over other things. It had several statutory powers. It could hold the required authorities responsible for any issues that could take place related to the stock market or finance in the country.
SEBI is important in establishing the securities market of the country.
Formation of SEBI
During 1970-80, capital markets and stocks were the need of the hour. More and more people were investing their time, energy, and money in the stock market. However, this soon turned into a conflict of sorts when the traders started indulging in malpractices like a violation of rules and regulations of the stock market, using higher prices than usual, unofficial placement of private commodities, irrelevant delay in stock delivery, and so on.
These malpractices have increased exceedingly in these years. Due to this, the Government of India decided to set up the SEBI. This was done to establish the confidence of people in the stock market again. The main target of the establishment of SEBI was to reduce these malpractices prevalent in the stock market.
Role of SEBI
SEBI was established in India to help in the proper working of the capital market of the country. It facilitates the full-fledged working of the financial market. SEBI plays a pivotal role in the economy of India. Due to this, SEBI works towards the smooth working of the securities in the market.
The role of SEBI is to regulate the top three participants of the capital market. This includes investors, issuers of securities, and financial intermediaries.
Investors
Investors are the people who tend to invest their time, energy, and money into the stock market. Investors keep the financial market going at all times. The role of SEBI is to prevent the prevalence of malpractices in the country.
Issuers of Securities
These are organisations or entities that are associated with the raising of funds. This is done to ensure the functioning of the corporate world and establish the securities of the market. SEBI works towards a well-established, transparent, and fully functioning environment for these entities. That is the primary role of SEBI.
Financial Intermediaries
These are the intermediate or middlemen between the investors and issuers of securities. They’re commonly known as brokers. They make the whole experience smooth, quick, and efficient.
Functions of SEBI
There are three major functions of SEBI. They are:
Protective Functions of SEBI
As the name goes, the functions of SEBI involve the protection of the various rights and interests of the people involved in the market. These include investors and financial participants.
This includes:
Promotion of fair and transparent practices.
To create awareness among the people involved.
To educate people on financial matters.
To remove malpractices related to the financial market.
To prevent unfair practices.
Regulatory Functions of SEBI
The regulatory functions of SEBI make sure to keep all the functioning of the financial market in check. It makes sure that the regulatory functions of SEBI are always in check.
These functions are:
To levy fees.
To conduct various audits.
For designing a basic layout of rules and regulations to establish the proper functioning of the corporate world.
For the registration of the various types of brokers in the financial market.
For the registration of credit rating agencies.
To regulate how the takeover of companies takes place.
Development Functions of SEBI
SEBI also performs several developmental functions to ensure the working of the financial market. They are:
To carry out various research activities.
For the buying and selling of mutual funds.
To establish training grounds for intermediaries.
To reduce malpractices.
For the promotion of fair trading practices.
Objectives of SEBI
There are a variety of objectives that the SEBI follows. They are:
SEBI helps in protecting the investors. They help in protecting the general interest of the public so that the investors have a safe and healthy environment to work in.
SEBI also works towards the prevention of various malpractices that are prevalent in the country. Malpractices in the stock market are very common. The main objective of SEBI is to prevent these.
SEBI also establishes a well-maintained and orderly functioning of the stock market. It also acts as a watchdog for the various financial intermediaries in the financial market.
Organisation of SEBI
The organisation of SEBI can be limited to nine members.
A Chairman is appointed by the Government of India.
Two members are appointed from the Finance Ministry Union.
One member is established by the Reserve Bank of India.
Five members are chosen from the Union Government of India.
Conclusion
We have discussed all the concepts of the Securities and Exchange Board of India or SEBI. It was established to prevent all the malpractices that were prevalent in the financial market. It did exercise a lot of rights and duties before 1992. However, it was established as an independent body after this year. It started exercising more rights after this and it was established as a statutory body. We also discussed all the functions of SEBI and how it works in the financial market. The role of SEBI is important as well as it controls the working of the investors, intermediaries, and issuers.
