Write the objectives and functions of SEBI.

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Points to Remember:

  • SEBI’s primary objective is to protect the interests of investors in securities markets.
  • SEBI performs its functions through regulation, surveillance, and enforcement.
  • SEBI’s functions cover various aspects of the securities market, including registration, listing, trading, and intermediaries.

Introduction:

The Securities and Exchange Board of India (SEBI) is a regulatory body established under the SEBI Act, 1992. Its creation stemmed from the need for a robust regulatory framework to protect investors and promote the orderly functioning of the Indian securities market. Prior to SEBI’s establishment, the market lacked transparency and was vulnerable to manipulation. The objective of establishing SEBI was to instill confidence in the market and encourage participation by both domestic and foreign investors. The World Bank’s reports on the Indian financial sector consistently highlight the importance of strong regulatory bodies like SEBI in fostering economic growth and stability.

Body:

Objectives of SEBI:

SEBI’s primary objectives, as enshrined in the SEBI Act, 1992, are:

  • Protecting the interests of investors: This is the cornerstone of SEBI’s existence. It aims to prevent fraud and manipulation in the securities market, ensuring fair and transparent dealings for all investors.
  • Promoting the development of, and regulating the securities market: SEBI strives to create a well-functioning, efficient, and transparent securities market that facilitates capital formation and economic growth.
  • Regulating and developing a code of conduct and fair practices by intermediaries: This includes brokers, sub-brokers, merchant bankers, underwriters, and other market participants. SEBI sets standards of professionalism and ethical conduct to maintain market integrity.

Functions of SEBI:

SEBI performs a wide range of functions to achieve its objectives. These can be broadly categorized as:

  • Regulatory Functions:

    • Registration and regulation of intermediaries: SEBI registers and regulates various market intermediaries, ensuring they meet specific criteria and adhere to regulatory standards.
    • Regulation of stock exchanges and other market infrastructure institutions: SEBI oversees the functioning of stock exchanges, clearing corporations, and depositories, ensuring their operational efficiency and adherence to regulations.
    • Regulation of mutual funds and collective investment schemes: SEBI regulates the operations of mutual funds, ensuring investor protection and the proper management of assets.
    • Regulation of corporate governance: SEBI sets standards for corporate governance, promoting transparency and accountability in listed companies.
    • Regulation of takeovers and acquisitions: SEBI regulates the process of takeovers and acquisitions, ensuring fairness and transparency.

  • Development Functions:

    • Promoting investor education and awareness: SEBI undertakes various initiatives to educate investors about the securities market and their rights.
    • Developing and implementing market infrastructure: SEBI works to improve the infrastructure of the securities market, including technology and systems.
    • Conducting research and studies: SEBI conducts research and studies to understand market trends and develop appropriate regulatory measures.

  • Enforcement Functions:

    • Monitoring and surveillance of market activities: SEBI monitors market activities to detect and prevent irregularities.
    • Investigating and prosecuting violations: SEBI investigates and prosecutes violations of securities laws and regulations.
    • Imposing penalties and sanctions: SEBI has the power to impose penalties and sanctions on those who violate regulations.

Conclusion:

SEBI plays a crucial role in the Indian economy by fostering a healthy and efficient securities market. Its objectives of investor protection, market development, and regulation of intermediaries are interlinked and essential for maintaining market integrity and stability. While SEBI has achieved significant success in regulating the market and protecting investors, continuous efforts are needed to adapt to evolving market dynamics and technological advancements. Future policy recommendations should focus on enhancing investor education, strengthening enforcement mechanisms, and promoting the use of technology to improve market efficiency and transparency. By upholding these principles, SEBI can continue to contribute to India’s economic growth and development while ensuring a fair and just securities market for all stakeholders. This ultimately contributes to a more inclusive and sustainable financial ecosystem, aligning with the broader goals of national development.

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