Question

Write notes on Functions of S.E.B.I. 

Answer 1

1.Protection Of Investor's Interest :-

SEBI frames rules and regulations to protect the interest of investors.

It monitors whether the rules and regulations are being followed by the concerned parties i.e., issuing companies, mutual funds, brokers and others. It handles investor grievances or complaints against brokers, securities issuing companies and others

2. Restriction On Insider Trading :-

SEBI restricts insider trading activity. It prohibits dealing, communication or counselling on matters relating to insider trading. SEBI’s regulation states that no insider (connected with the company) shall - either on his own behalf or on behalf of any other person, deal in securities of a company listed on any stock exchange on the basis of any unpublished price sensitive information.

3. Regulates Stock Brokers Activities :-

SEBI has also laid down regulations in respect of brokers and sub-broker. No brokers or sub-broker can buy, sell or deal in securities without being a registered member of SEBI. It has also made compulsory for brokers to maintain separate accounts for their clients and for themselves. They must also have their books audited and audit reports filed with SEBI.

4. Regulates Merchant Banking :-

SEBI has laid down regulations in respect of merchant banking activities in India. The regulations are in respect of registration, code of conduct to be followed, submission of half-yearly results and so on

5. Dematerialisation Of Shares :-

Demat of shares has been introduced in all the shares traded on secondary stock markets as well as those issued to public in prirriary markets. Even bonds and debentures are allowed in demat form.

6. Guidelines On Capital Issues :-

SEBI has framed necessary guidelines in connection with capital issues. The guidelines are applicable to :- First Public Issue of New Companies, First Public Issue by Existing Private / Closely held Companies, Public Issue by Existing Listed Companies.

7. Regulate Working Of Mutual Funds :-

SEBI regulates the working of mutual funds. SEBI has laid down rules and regulations that are to be followed by mutual funds. SEBI may cancel the registration of a mutual fund, if it fails to comply with the regulations. 

8. Monitoring Of Stock Exchanges:-

To improve the working of stock markets, SEBI plays an important role in monitoring stock exchanges. Every recognised stock exchange has to furnish to SEBI annually with a report about its activities during the previous year.

9.Secondary Market Policy :-

SEBI is responsible for all policy and regulatory issues for secondary market and new investments products. It is responsible for registration and monitoring of members of stock exchanges, administration of some of stock exchanges and monitoring of price movements and insider trading.    

10. Investors Grievances Redressal :-

SEBI has introduced an automated complaints handling system to deal with investor complaints. It assist investors who want to make complaints to SEBI against listed companies.

11. Institutional Investment Policy :-

SEBI looks after institutional investment policy with respect to domestic mutual funds and Foreign Institutional Investors (FIIs). It also looks after registration, regulation and monitoring of FIls and domestic mutual funds.

12. Takeovers And Mergers :-

To protect the interest of investors in case of takeovers and mergers SEBI has issued a set of guidelines. These guidelines are to be followed by corporations at the time of takeovers and mergers.

13. Reforms In Capital Market :-

SEBI has introduced many reforms in Capital Market. Some of them are :-

1. a)Demat of shares
2. b)PAN made compulsory.
3. c)Buy back of shares allowed.
4. d)Corporate Governance introduced
5. e)Transparency rules in Brokers Transactions.
6. Other Functions :-
7. a)It promotes investor’s education, and also training of intermediaries in securities market.
8. b)It performs functions and exercise powers under provisions of Capital Issues (Control) Act 1947, Securities Contracts Act 1956 etc.
9. c)It promotes and regulates self-regulatory organisations.
10. d)It prohibits fraudulent and unfair trade practices in securities Market
11. e)It promotes investors education and training in securities market. 

APPRAISAL OF SEBI'S WORK

1)    Large Number Of Rules :-

There are large .number of rules prescribed by SEBI. These have also been changing from time to time. This has created a high level of uncertainty and confusion. It is very difficult to determine what rules are currently in operation.

2)    Less Protection To Small Investors :-

SEBI is not really serious about reforming the system and protecting the individual and small investors. It has failed to penalise the people responsible for causing abnormal price fluctuations on stock market.

3)    False Claim On High Success Rate :-

SEBI’s Annual Report, in 1995-96 claims, a very high success rale in resolving investor complaints. But in reality it is not so.

4)    Insufficient Power :-

SEBI has often complained of having insufficient authority and power. It should become more effective, efficient, socially-accountable and small - investor - friendly.

working is quite good. Liquidity in market has improved various segments have also become interlinked. It provides a world class trading and’ settlement system.

5)    Corporate – Friendly regulation :-

The regulatory ineffectiveness of SEBI in certain areas has been due to its concentration on symptoms rather than the root causes.