4.11 SEBI

Hanumant Dhokle


The Securities and Exchange Board of India (SEBI) came into being to promote orderly and healthy development of the securities markets and to provide adequate investor protection. Headquartered in Mumbai, SEBI’s function is to ensure a conducive environment for growth in the capital market. The three objectives of SEBI as per SEBI Act, 1992, are:

  1. Protect the interests of investors in securities.
  2. Promote the development of the securities market.
  3. Regulation of securities market.

SEBI has to be responsive to the needs of three groups, which constitute the market:

  • the issuers of securities (or companies)
  • the investors (you and me)
  • the market intermediaries. (brokers, banks, depositories, etc.)

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. SEBI can take various actions like debarring entities/companies from buying, selling or dealing in securities, cancel the registration of intermediaries and imposing monetary penalty. In addition, SEBI also can launch prosecution for violation of the laws pertaining to securities market. Though this makes it very powerful, there is an appeals process to create accountability. There is a Securities Appellate Tribunal (SAT) which is a three member tribunal and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the supreme court.

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as required under law.

The SEBI board consists of a chairman, two government-nominated members from the Ministry of Finance and the Ministry of Company Affairs, one member from RBI, three full-time members and two other members appointed by the Central Government.

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