Securities and Exchange Board Of India: Powers and Functions
Securities and Exchange Board of India Act, 1992 established the Securities and Exchange Board of India (SEBI). SEBI has its headquarters in MUMBAI.
In 1947, the Parliament of India passed the Capital Issue (Control) Act of 1947. With this the office of Controller of Capital Issues, to regulate the securities market in India, was established. The Securities and Exchange Board of India (SEBI) supplanted the office of Controller of Capital Issues. SEBI basically came into existence as a non-statutory body in 1988 by a resolution of the Government of India. However, with the passing of the 1992 Act, it got the statutory status. With this Act, SEBI became an autonomous body of the Government of India. It was created to regulate the securities/capital market of India.
Capital Market is a part of financial market. The financial markets have two major components- money market and capital market. Money market refers to the market where short term loans are given to solve the liquidity needs of the borrowers. Money market instruments mature less than one year. Moreover, money market instruments have lower default risk; therefore, they have high marketability. On the other hand capital market is a market a market for financial investments that are related to capital. It is wider than securities market and encapsulates all forms of lending and borrowing. In this market intermediate term funds and long term funds are pooled and made available to the government, business and individuals.
SEBI is a body corporate having perpetual succession and a common seal. Main objective of SEBI is to protect the interests of the investors. Moreover it always strives to work for growth of the securities market.
Composition of SEBI Board
Section 4(1) of the SEBI Act provides that the SEBI Board shall consist of the following nine (9) members, namely:
- A Chairman. Chairman is to be nominated by the Central Government.
- Two members from amongst the officials of the Ministry of the Central Government dealing with finance and administration of the Companies Act 2013;
- One member from amongst the officials of the Reserve Bank Of India;
- Five other members of whom at least three shall be the whole time members, to be appointed by the Central Government.
Functions of SEBI
- To review the market operations, organizational structure and administrative control of the stock exchanges.
- To overlook the registration and regulation of working of market intermediaries such as merchant bankers, portfolio managers, stock broker etc.
- To overlook the registration and regulation of Mutual Funds, Venture Capital Funds and Collective Investment Schemes.
- To promote and regulate Self Regulatory Organizations.
- Prohibiting fraudulent and unfair trade practices in the securities market.
- Prohibition of Insider Trading.
- To educate and train the investors.
- To conduct inspections and inquiries
- Conducting research to perform the above functions.
Powers of SEBI
In order to perform the functions, SEBI has been bestowed with wide range of powers. Some of which are herein culled out for better understanding of the topic.
- Power to Inspect Books of Accounts: Accounts of any listed public company or a public company intending to be listed can be inspected by SEBI. However for such inspection there should be reasonable grounds to suggest that the company is indulging in unfair trade practices or is involved in insider trading.
- Powers as vested in civil court: While trying any suit, SEBI has the same power as vested in a civil court under the Code of Civil Procedure, 1908.
- Power to regulate securities market intermediaries: SEBI has the power to regulate the intermediaries for proper functioning of the market. In order to do so it can also restrain persons from accessing the securities market and even prohibit any person from such access.
- Power to investigate: IF SEBI has reasonable grounds to suggest that the any particular transaction or transactions are dealt in a manner which is detrimental for the investor, then it can order anyone to investigate such transactions.