What is SEBI?

What is the Securities and Exchange Board of India (SEBI)?

So, what Is SEBI? SEBI (or Securities and Exchange Board of India) is an important regulator of securities markets. It is the Indian Government’s statutory body, established on April 12, 1992. Introduced to promote the Indian market’s transparency, SEBI is headquartered in Mumbai. This establishment has different regional offices nationwide, such as Kolkata, Chennai, Ahmedabad, and New Delhi.

By the SEBI definition, the prime role of this regulatory body is to regulate the functioning of the Indian capital market. It aims to regulate, monitor, and manage the Indian securities market. The prime intention is to safeguard investors’ interests and boost a safe investment environment by incorporating rules &regulations. To improve the investment scenarios in India, it formulates investment-related guidelines.
 

Why is SEBI formed?

Want to know SEBI meaning and purpose? SEBI is formed for several purposes; here are a few reasons:

Safeguards investors of the share market

Established to secure investors’ interests in the share market, SEBI offers a secure environment. It offers continuous improvement through measures and guidelines for share market participants.

Protects Malpractices and Fraud

Securities and Exchange Board of India aims to prevent unfair trade & malpractices in the share market. Besides, it also has an independent digital complaint cell where individuals can complain & resolve queries. With the formation of SEBI, malicious activities in this share market have been mitigated, thereby increasing transparency.

Fair Functioning

SEBI safeguards activities in this market. In case of nefarious activities, investors can file complaints directly on SEBI’s website. Or they can even complain to the headquarters.
 

The Structural Set Up of SEBI India

SEBI board consists of nine members:

●    Chairman, who is appointed by the Central Government
●    A board member who is appointed by RBI (or central bank)
●    2 board members (from the Union Ministry of Finance)
●    5 board members elected by Central Government of India

The Chairman and the Board look over the Vigilance, Communications & Internal Inspection Department. A total of four whole-time members are there in the structure. They are allocated departments. Every department has spearheaded by one executive director. These directors report to the whole-time members.

SEBI’s organizational structure comprises over 25 departments:

●    FPI&C or Foreign Portfolio Investors and Custodians
●    CFD or Corporation Finance Department
●    ITD or Information Technology Department
●    DEPA-I, II, & III or Department of Economic and Policy Analysis
●    Investment Management Department
●    NISM or National Institute of Securities Market
●    Legal Affair Department and
●    T&A or Treasury and Accounts Divisions
 

Powers and Functions of SEBI

SEBI has several functions to meet the key objectives. Some of the functions of SEBI include the following:

●    Protective functions
●    Regulatory functions
●    Developmental functions

The functions performed are the following:

●    Checks price manipulation
●    Bans insider trading
●    Prohibits unfair & fraudulent trade approaches
●    Boosts a fair code of conduct
●    Educates investors about how to evaluate investment options

For regulatory functions, SEBI does the following:

●    Designs a code of conduct, regulations, and rules to regulate underwriters, brokers, and intermediaries
●    Governs a firm’s takeover
●    Regulates & registers mutual funds and functions of share transfer agents, merchant bankers, stockbrokers, trustees, and more
●    Performs audits of the exchanges

SEBI does these things considering the developmental functions:

●    Facilitates intermediaries’ training
●    Promotes activities of stock exchanges with a decent tactic

SEBI Act and SEBI Guidelines

SEBI was previously a non-statutory establishment that monitored share market activities. After the SEBI Act of 1922, it became a statutory body having independent jurisdiction. This Act gave it the power to enforce regulations. As per the SEBI Act 1992, it covers the following things:

●    Actions and composition of SEBI Board members
●    Board’s functions and powers
●    SEBI’s fund sources (grants made by Union Government)
●    Rules on penalties
●    Norms associated with the anti-money laundering
●    Defining SEBI’s judicial authority
●    Union Government’s extent of powers to supersede it

SEBI also has to follow guidelines for specified areas, including:

●    Employee stock option schemes
●    Disclosure & investor protection norms
●    Initiating trading terminals overseas
●    Legal proceedings
●    Listing & delisting of securities
 

SEBI LODR regulations 2015

LODR or Listing Obligations and Disclosure Requirements regulation for SEBI is a significant consideration. This regulation comprises the extent of disclosures and transparency that enlist companies that need to follow them. Besides the mandatory disclosure norms, it refines listing agreements.

The agreement includes terms & conditions on disclosures, governance, and terms. It intends to maintain a company’s listing status. But 2015’s regulation on LODR aims to consolidate previous amendments into a document. So, it makes the document uniform around several segments of the market.

The LODR Regulations entail the following as of 2015:

●    Disclosures & obligations acknowledged by compliance officers of listed companies
●    Pointing out obligations uniform to listed organisations
●    Separate obligations for different securities types
●    Distinguished initial issuance & post-IPO norms
●    Interactions of companies’ fundraising actions and events
●    Creating timelines to notify exchanges of events
●    Bringing SMEs under the ambit of the regulations
For a complete list of regulations that govern the market regulator, click here.
 

SEBI New Margin Rules

SEBI (or Securities and Exchange Board of India) incorporated new rules in September 2020. According to the new rule, it is expected to introduce transparency and reduce misusing clients’ securities by brokerage companies. This new margin rule was anticipated to get introduced on June 1. However, it was delayed to September 1 because of the pandemic outbreak.

One of the core objectives of SEBI was to curb market anticipations and protect individual investors from huge losses in the volatile market. According to the new rules, SEBI follows these things:

●    The stock is in an investor’s Demat account. Remember, since stock does not change accounts, investors can get added benefits from the corporate events.
●    POA or Power of Attorney can’t be assigned with regard to brokers for pledging. As per the old system, brokers may demand POA from investors to execute decisions in support of them
●    Upfront collection of margins for purchases or sales of securities by brokers, penalizing failure to do so. Clients may meet margin requirements by EOD. Now it is changed to the BOD or beginning of the day
●    Margin pledges formed separately need margin for investors
●    BTST or Buy Today Sell Tomorrow is not allowed anymore for shares purchased on the margin. Investors need to honour the delivery of shares. The settlement period is usually T+2 days. Also, investors may use intraday realized profits in order to meet margin requirements. Now, it has been amended by new regulations. Any BTST trade gets initiated only when the overall net margin is greater than or equal to 20 per cent of the transaction amount.