What is SEBI? Why was SEBI established?: Everything You Must Know

SEBI is a term that every stock market trader, investor, or regular tracker of the market would know about. Despite knowing that SEBI is a body that plays a major role in the stock market, a lot of us need to be made aware of its actual roles and responsibilities. To summarise, SEBI is a body that takes care of every trade or transaction that takes place in the market. Moreover, it also ensures transparency and complete legitimacy in every stock market happening.

In this article, we will learn in detail about what SEBI is, along with other important information, including its roles, responsibilities, powers of SEBI, what all members of SEBI comprise, and much more. 

Structure of SEBI

Before diving into the major concepts related to SEBI and its roles in the market, it is important to understand the structure of SEBI. The structure of SEBI includes nine members who are responsible for its smooth functioning and maintenance of market laws in India. These nine members include:

  • The Chairman of SEBI is its primary member and is elected by the Government of India
  • One member from the Reserve Bank of India
  • Two members from the Union Ministry of Finance
  • The Central Government of India elects the remaining five members

All these members comprise the nine members of the board of SEBI who are responsible for its smooth working.

What is SEBI, and Why Was SEBI Established?

SEBI is one of the most important regulatory bodies in the market. It, or the Securities and Exchange Board of India, is responsible for ensuring that the money in the market is dealt with fairly.

With a huge number of transactions taking place every day, there were chances of frequent fraudulent activities and loss of investors in the market. Therefore, a body was needed to monitor and ensure that all market transactions were fairly carried out. As a result, the Government of India created SEBI in 1992. 

Ever since 1992, SEBI has been dedicated to protecting investors’ rights and ensuring that they remain aware of the latest updates about security exchanges in the market. 

Powers of SEBI

As a primary regulatory body of the Indian stock market, SEBI is assigned certain legal powers to uncover frauds, penalise unfair means, and other similar acts.

  • First off, SEBI has quasi-judicial authority that enables it to monitor and investigate any market fraud. Furthermore, SEBI retains the authority to fairly and transparently reject rulings in these kinds of situations. This is to guarantee that market securities are controlled in an entirely equitable manner.
  • Second, SEBI’s quasi-legislative authority enables it to oversee certain legislation in order to guarantee the abolition of market malpractices. These regulations guarantee that investors are shielded from engaging in any unethical behaviour in the market. As a result, SEBI creates regulations pertaining to listing requirements, insider reading, and mandatory disclosures.
  • Last but not least, SEBI’s quasi-executive authority enables it to review any important financial records to make sure no laws are broken. These important papers can support the inquiry and will allow SEBI to render an impartial assessment of the whole case. 

Objectives of SEBI in the Stock Market

Now that you are aware of what SEBI is let’s examine its primary goals and roles within the stock market:

  • Preventing Frauds: One of SEBI’s main goals is ensuring that securities in the market are appropriately regulated. SEBI ensures that there are no fraudulent activities in the market and punishes those thought to be involved in them.
  • Investor Protection: Preserving investor rights was the primary motivation behind SEBI’s founding. As a result, SEBI advises investors on how to make secure market investments and ensures that all market transactions respect the investor’s rights.
  • Create a Code of Conduct: SEBI also ensures that financial intermediaries, such as brokers and underwriters, abide by the code of conduct.
  • Market Regulation: SEBI’s primary objective is to regulate market securities fairly. This objective includes many other functions, including managing the complaints division, promoting learning opportunities for investors, regulating capital markets, and similar concepts.

Conclusion

To sum up, SEBI is an important regulatory body that ensures that the stock market procedures are carried out smoothly by fair means. 

The role of SEBI in the stock exchange was to set up an environment for the mobilisation and allocation of resources. Therefore, SEBI plays an important role for issuers who find a marketplace for raising funds, investors who are supplied with the correct information through SEBI, and the intermediaries for whom SEBI provides a competitive market.