SEBI: A Statutory and Regulatory Body in the Indian Securities Market
The Securities and Exchange Board of India (SEBI) plays a crucial role in the Indian securities market, serving both as a statutory body and a regulatory authority. Understanding the dual nature of SEBI's role is essential for comprehending its functions and the legal framework underpinning its operations.
Statutory Body
SEBI is established under the Securities and Exchange Board of India Act, 1992. This specific legislation defines the powers, responsibilities, and functions of SEBI. As a statutory body, SEBI operates within the parameters set by the Indian Parliament to ensure it adheres to the law and has the necessary authority to act. The establishment of SEBI under this Act grants it the power to create and enforce securities regulations, which is crucial for maintaining order and transparency in the market.
Regulatory Body
SEBI acts as the primary regulator of the securities market in India. Its primary roles include protecting the interests of investors, promoting the development of the securities market, and regulating its functioning. SEBI sets rules and regulations for various entities involved in the market, such as stock exchanges, brokers, and listed companies. These regulations aim to ensure fair trading practices and prevent fraudulent activities, thereby safeguarding investor interests.
Legal Framework and Powers
SEBI's powers are significantly enhanced by the Securities and Exchange Board of India Act, 1992. The Act grants SEBI the authority to seize, inquire into, and enforce legal actions against fraudulent activities. This legal backing ensures that SEBI can effectively regulate the market and ensure compliance with statutory requirements.
Historical Context and Evolution
SEBI was first established in 1988 as a non-statutory body for regulating the securities market. However, in 1992, the Government of India granted SEBI additional statutory power through an amendment to the Securities and Exchange Board of India Act. This change transformed SEBI into a statutory body, providing it with the necessary legal framework to enforce its regulations.
Functions and Structure
SEBI's functions and structure are designed to ensure the efficient and fair functioning of the Indian securities market. It has headquarters in Mumbai and regional offices in major cities across India, including New Delhi, Kolkata, Chennai, and Ahmedabad. Additionally, SEBI is planning to open offices in Jaipur, Bangalore, and other cities in the upcoming financial year.
The regulatory activities of SEBI are organized through several divisions:
Division of Market Policy: Responsible for policy relating to commodity derivative exchanges, trading, clearing, and settlement operations. Division of Exchange Administration: Manages the registration, recognition, and administration of commodity derivative exchanges. Reviews rule change proposals and oversees commodity derivatives exchanges. Division of Exchange Inspection and Complaints against Exchanges: Conducts inspections, monitors IT infrastructure, and deals with complaints related to exchanges. Division of Risk Management and Products: Approves products/contracts for trading and manages risk frameworks.Quasi-Powers and Accountability
SEBI's quasi-legislative, quasi-judicial, and quasi-executive powers are quite unique. It drafts regulations, conducts investigations, enforces them, and passes rulings, all within its quasi-judicial capacity. This combination of powers, however, comes with accountability mechanisms, such as the Securities Appellate Tribunal, which is a three-member tribunal headed by a former Supreme Court judge. A further appeal lies directly to the Supreme Court, ensuring that SEBI's decisions are transparent and subject to judicial review.
Conclusion
The dual nature of SEBI as both a statutory and regulatory body underscores its critical role in maintaining the integrity of the Indian securities market. Its legal framework, combined with its regulatory powers, ensures that the market operates efficiently, fairly, and transparently. Understanding SEBI's functions and structure is essential for stakeholders, including investors, issuers, and market intermediaries, to navigate the complex world of securities trading in India.