Financial instruments like mutual funds, investment in equities, insurance, pension all of them involve money, hence it is imperative that these instruments are well regulated and rules for operations of these instruments are set by Govt appointed regulators. All these financial instruments operate differently, hence there are different regulators.
For equities and Mutual Funds, Securities and Exchange Board of India (SEBI) is the regulator.
What is SEBI?
SEBI is a regulatory body that was established in the year 1992. It was the 12th of April when it began to flourish. The SEBI is responsible for monitoring as well as regulating the securities market as well as it also looks over the Indian capital market. It also takes care of its investor’s interests. Apart from all these it also keeps an eye on the guidelines. Now that we have known about the foundation and definition of SEBI, let’s also know the place where its head office is located. SEBI has its head office in Mumbai.
How does it function?
The SEBI also has some major and minor functions. Some of these areas are mentioned below: –
• The SEBI is solely responsible for protecting and preserving the interests of the investors in the whole market.
• The SEBI regulates the business and ensures its free or easy flow.
• The development of securities also lies in the hands of SEBI so it’s also responsible for the developments carried out.
• It provides a common platform for every person associated with this market. Be it managers, investment experts, several agents, trustees, registrars, and many more all can easily register and regulate just because of SEBI.
• SEBI is also accountable for the regulation of various kinds of operations be it of depositors, participants, investors, or any organization, etc.
• SEBI also takes care of unfair practices and frauds prevailing in the securities market.
• It lays stress on the education of the investors too.
• SEBI also looks over the substantial acquisitions.
• Research and development are also another functions of SEBI which is a must in the securities market.
Organisational structure of SEBI
SEBI doesn’t work solely; rather it has properly distributed departments under the same roof to ensure the proper management of the whole system. That’s the reason why SEBI has many divisions or departments to manage staff. Each of these subdivisions or the department has its head who leads it.
There are 20 different departments in the SEBI. Some of the departments are economic and policy analysis, corporate finance, debt & hybrid securities, enforcement, commodities derivatives market regulator, human resource, legal affairs, etc. The structure of SEBI according to their rank goes like the first chairman, two officers, and one member from RBI, and then at least five from the union government of India. Here the chairman is nominated by the union government and similarly the two officers from the finance ministry(union).
Authority and power of SEBI
The authority and power of SEBI are majorly confined under three bodies. These three bodies have all the control over the power. These three are quasi-judicial, executive, and legislative. Let’s discuss them in brief.
The first and foremost one is quasi-judicial. The quasi-judicial is the authority or body that specifically looks over the delivery of judgments over the issues that come up gradually. These issues are related to frauds, unfair practices, and many more in the security markets. Thus, it’s this quasi-judicial that keeps fairness and transparency alive in the market.
Next, we move on to the quasi-executive. It’s the body that implements the judgments made by the executive. Last but not least is the legislative. SEBI also looks into making rules and regulations with the present needs of the investors. So, the legislative body is responsible for this. Some of the rules are related to obligations, trading, etc.
How does SEBI regulate mutual funds?
SEBI also regulates mutual funds. Here we have enlisted a few regulations for mutual funds. These are: –
A. The shareholder cannot possess more than 10% or even 10% shareholdings.
B. Single stocks cannot have more than 35% weight in the index.
C. Top three cumulative weights cannot cross 65%.
D. Trading frequency allowed is 80% only.
E. New funds have to submit compliance status to SEBI.
F. Liquid schemes have to hold a minimum of 20% assets.
G. Schemes like liquid and overnight cannot invest in debt, short-term deposits, and many such related ones.
The AMC manages the mutual funds’ stands for asset management companies. These need the approval of the SEBI. Those who are trustees of AMC can easily look over the performance of these mutual funds. It also needs to ensure that the work is carried in compliance with SEBI regulations or not.
So, this was all about SEBI and various related topics to it. We got to know that the main objective of SEBI is the monitoring of the regulation of the Indian capital market. It also aims to provide full transparency to the investors. SEBI was also settled to exclude and stop all the malpractices being carried out. Hope this blog was able to answer all your queries.
SEBI is controlled by the Union Govt of India
Yes, SEBI has oversight on all capital market participants, so the derivatives market is also regulated by SEBI
SEBI is important because it safeguards the interests of participants of the Indian capital market. It also establishes various rules and regulations for operations of the Indian securities and capital markets.