Securities and Exchange Board of India

The Securities and Exchange Board of India: A Comprehensive Overview. The Securities and Exchange Board of India (SEBI) plays a crucial role in regulating and overseeing the securities and commodity market in India. It operates under the ownership of the Ministry of Finance within the Government of India.

Established on April 12, 1988, as an executive body, SEBI was granted statutory powers on January 30, 1992, through the SEBI Act, 1992.

In this article, we will delve into the history, functions, and responsibilities of Securities and Exchange Board of India (SEBI), as well as its organizational structure and notable achievements.

History

The Securities and Exchange Board of India (SEBI) was initially established in 1988 as a non-statutory body to regulate the securities market. It gained autonomy on January 30, 1992, when the Parliament of India passed the SEBI Act 1992, conferring it with statutory powers.

SEBI has its headquarters located in the business district of Bandra Kurla Complex in Mumbai. Additionally, it has regional offices in New Delhi, Kolkata, Chennai, and Ahmedabad.

Over the years, SEBI has expanded its presence by establishing local offices in Jaipur, Bangalore, Guwahati, Bhubaneshwar, Patna, Kochi, and Chandigarh.

Before SEBI’s establishment, the regulatory authority responsible for the securities market was the Controller of Capital Issues, which derived its authority from the Capital Issues (Control) Act, 1947.

Organization Structure

Securities and Exchange Board of India (SEBI) operates under the guidance and management of its members. The composition of the members is as follows:

• The chairman, who is nominated by the Union Government of India.
• Two members representing officers from the Union Finance Ministry.
• One member from the Reserve Bank of India.
• The remaining five members nominated by the Union Government of India, with a requirement of at least three whole-time members.

In March 2022, Madhabi Puri Buch assumed the position of chairman, becoming the first woman to hold this position in SEBI’s history.

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Current Board Members

The current board members of Securities and Exchange Board of India (SEBI) are:

• Madhabi Puri Buch (Chairman)
• S.K Mohanty (Whole-time member)
• Raje Prem Kumar (Whole-time member)
• Ashwini Bhatia (Whole-time member)
• Ajay Seth (Part-time member)
• Rajesh Verma (Part-time member)
• M. Rajeshwar Rao (Part-time member)
• V Ravi Anshuman (Part-time member)

Powers of SEBI

Securities and Exchange Board of India (SEBI) possesses several powers to effectively discharge its functions. These powers include:

• Approval of by-laws of securities exchanges.
• Authority to require securities exchanges to amend their by-laws.
• Inspection of books of accounts and periodic returns from recognized securities exchanges.
• Examination of books of accounts of financial intermediaries.
• Compulsion for certain companies to list their shares in one or more securities exchanges.
• Registration of brokers and sub-brokers.

SEBI Committees

Securities and Exchange Board of India (SEBI) has established various committees to assist in its functioning and decision-making processes. Some of the notable committees are:

• Technical Advisory Committee
• Committee for the review of the structure of infrastructure institutions
• Advisory Committee for the SEBI Investor Protection and Education Fund
• Takeover Regulations Advisory Committee
• Primary Market Advisory Committee (PMAC)
• Secondary Market Advisory Committee (SMAC)
• Mutual Fund Advisory Committee
• Corporate Bonds & Securitization Advisory Committee

Functions and Responsibilities

The Securities and Exchange Board of India is entrusted with the following key functions and responsibilities:

1. Protecting the interests of investors in securities.
2. Promoting the development of the securities market.
3. Regulating the securities market and related matters.

SEBI serves the needs of three main groups that constitute the market: issuers of securities, investors, and market intermediaries. It possesses quasi-legislative, quasi-judicial, and quasi-executive powers.

In its legislative capacity, Securities and Exchange Board of India (SEBI) drafts regulations; in its executive function, it conducts investigations and enforcement actions, and in its judicial capacity, it passes rulings and orders.

However, an appeal process exists to ensure accountability. The Securities Appellate Tribunal, a three-member tribunal, serves as the first appellate authority, and a second appeal lies directly with the Supreme Court.

Securities and Exchange Board of India (SEBI): Powers

SEBI is vested with the following powers to discharge its functions effectively:

• Approve by-laws of securities exchanges.
• Require securities exchanges to amend their by-laws.
• Inspect the books of accounts and call for periodical returns from recognized securities exchanges.
• Inspect the books of accounts of financial intermediaries.
• Compel certain companies to list their shares in one or more securities exchanges.
• Registration of brokers and sub-brokers.

Major Achievements

Securities and Exchange Board of India (SEBI) has achieved significant success as a regulator through its proactive and systematic reforms. It played a crucial role in making the Indian markets electronic and paperless by introducing rolling settlement cycles of T+5, T+3, and T+2.

These cycles determine the settlement period after the trade date. Securities and Exchange Board of India (SEBI) has streamlined disclosure requirements to align with international standards, ensuring transparency and investor protection.

During times of global economic challenges and crises, Securities and Exchange Board of India (SEBI) has taken quick and effective steps. It increased the extent and quantity of disclosures required from Indian corporate promoters and liberalized the takeover code to facilitate investments.

SEBI has made notable contributions to financial literacy and investor education, as evidenced by its collaboration with organizations like the Metropolitan Stock Exchange of India Limited and CASI New York.

Controversies

SEBI has faced controversies and legal challenges related to its functioning and appointments of key personnel.

Public Interest Litigations (PIL) have been filed questioning the procedure for key appointments within SEBI and expressing concerns about the independence and balance of the organization.

Additionally, allegations have been made regarding attempts to influence SEBI’s cases by powerful corporate interests. These controversies highlight the significance of transparency and independence in regulatory bodies.

SEBI and Regional Securities Exchanges

In an effort to address the illiquid nature of trade in many regional securities exchanges, SEBI issued guidelines for exit options.

These guidelines required securities exchanges to meet certain criteria or gracefully exit the business.

The regulations mandated a minimum net worth of ₹1 billion and an annual trading volume of ₹10 billion for recognized securities exchanges. SEBI granted a two-year period for compliance or exit.

Process of De-recognition and Exit

The de-recognition and exit process for securities exchanges involves the following steps:

• Exchanges may voluntarily surrender recognition to SEBI.
• Securities exchanges with an annual trading turnover of less than ₹10 billion can apply to SEBI for voluntary surrender of recognition and exit within two years. 3If the securities exchange fails to achieve the prescribed turnover or does not apply for voluntary surrender within the specified timeframe, SEBI proceeds with compulsory de-recognition and exit as per the conditions set by the regulatory body. Securities exchanges that are already de-recognized must apply for exit within two months from the date of the circular; failure to do so will result in compulsory exit.

Securities and Exchange Board of India (SEBI) Departments

SEBI operates through its various departments, each responsible for specific aspects of regulating the Indian financial market. The departments of SEBI are as follows:

• Commodity Derivatives Market Regulation Department (CDMRD)
• Corporation Finance Department (CFD)
• Department of Economic and Policy Analysis (DEPA)
• Department of Debt and Hybrid Securities (DDHS)
• Enforcement Department – 1 (EFD1)
• Enforcement Department – 2 (EFD2)
• Enquiries and Adjudication Department (EAD)
• General Services Department (GSD)
• Human Resources Department (HRD)
• Information Technology Department (ITD)
• Integrated Surveillance Department (ISD)
• Investigations Department (IVD)
• Investment Management Department (IMD)
• Legal Affairs Department (LAD)
• Market Intermediaries Regulation and Supervision Department (MIRSD)
• Market Regulation Department (MRD)
• Office of International Affairs (OIA)
• Office of Investor Assistance and Education (OIAE)
• Office of the chairman (OCH)
• Regional Offices (ROs)

These departments work collectively to ensure the smooth functioning and regulation of the securities market in India.

In conclusion, the Securities and Exchange Board of India (SEBI) plays a vital role in regulating and overseeing the securities and commodity market in India. With its statutory powers, SEBI aims to protect the interests of investors, promote the development of the securities market, and regulate various aspects of the market. Through its proactive measures, SEBI has made significant achievements and implemented reforms that have contributed to the growth and transparency of the Indian securities market.

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