SEBI Bhavan, Mumbai | |
Agency overview | |
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Formed | April 12, 1988 (Established) January 30, 1992 (Acquired Statutory Status) [1] |
Type | Regulatory agency |
Headquarters | Mumbai, Maharashtra |
Employees | 867+ (2020) [2] |
Agency executive | |
Parent department | Ministry of Finance, Government of India |
Child agencies | |
Key document |
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Website | sebi |
Footnotes | |
[4] |
Categories of |
Financial risk |
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Credit risk |
Market risk |
Liquidity risk |
Investment risk |
Business risk |
Profit risk |
Non-financial risk |
The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity market in India under the administrative domain of Ministry of Finance within the Government of India. It was established on 12 April 1988 as an executive body and was given statutory powers on 30 January 1992 through the SEBI Act, 1992. [1] [5]
The Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory body for regulating the securities market. Before it came into existence, the Controller of Capital Issues was the market's regulatory authority, and derived power from the Capital Issues (Control) Act, 1947. [6] SEBI became an autonomous body on 30 January 1992 and was accorded statutory powers with the passing of the SEBI Act, 1992 by the Parliament of India. [7] It has its headquarters at the business district of Bandra Kurla Complex in Mumbai and has Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai, and Ahmedabad, respectively. Up until June 2023, it also had 17 local offices spread all over India to promote investor education; however, 16 of them were closed as part of a restructuring exercise. [8] [9]
SEBI is managed by its board of members, which consist of the following people:
After the amendment of 1999, collective investment schemes were brought under SEBI except nidhis, chit funds and cooperatives.
Madhabi Puri Buch took charge of chairman on 1 March 2022, replacing Ajay Tyagi, whose term ended on 28 February 2022. Madhabi Puri Buch is the first woman chairperson of SEBI. [10] [11]
The board comprises: [12] [13]
Name | Designation |
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Madhabi Puri Buch | Chairperson |
S.K Mohanty | Whole time member |
Ananth Narayan G | Whole time member |
Ashwini Bhatia | Whole time member |
Kamlesh Chandra Varshney | Whole time member |
Ajay Seth | Part-time member |
Rajesh Verma | Part-time member |
M. Rajeshwar Rao | Part-time member |
V Ravi Anshuman | Part-time member |
List of Chairmen: [14]
Name | From | To |
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Madhabi Puri Buch | 1 March 2022 | Present |
Ajay Tyagi | 10 February 2017 | 28 February 2022 |
U K Sinha | 18 February 2011 | 10 February 2017 |
C. B. Bhave | 18 February 2008 | 18 February 2011 |
M. Damodaran | 18 February 2005 | 18 February 2008 |
G. N. Bajpai | 20 February 2002 | 18 February 2005 |
D. R. Mehta | 21 February 1995 | 20 February 2002 |
S. S. Nadkarni | 17 January 1994 | 31 January 1995 |
G. V. Ramakrishna | 24 August 1990 | 17 January 1994 |
Dr. S. A. Dave | 12 April 1988 | 23 August 1990 |
The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as "...to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to".
SEBI has to be responsive to the needs of three groups, which constitute the market:
SEBI has three powers rolled into one body: quasi-legislative, quasi-judicial and quasi-executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeal process to create accountability. There is a Securities Appellate Tribunal which is a three-member tribunal and is currently headed by Justice Tarun Agarwala, former Chief Justice of the Meghalaya High Court. [15] A second appeal lies directly to the Supreme Court. SEBI has taken a very proactive role in streamlining disclosure requirements to international standards. [16]
For the discharge of its functions efficiently, SEBI has been vested with the following powers:
SEBI committees
There are two types of brokers:
SEBI has enjoyed success as a regulator by pushing systematic reforms aggressively and successively. It is credited for quick movement towards making the markets electronic and paperless by introducing the T+5 rolling cycle in July 2001, the T+3 in April 2002, and the T+2 in April 2003. The rolling cycle of T+2 means that settlement is done in 2 days after trade date. [17] [18] SEBI has also been active in setting up the regulations as required under law. It did away with physical certificates that were prone to postal delays, theft and forgery, apart from making the settlement process slow and cumbersome, by passing the Depositories Act, 1996. [19] [20]
SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam fiasco.[ citation needed ] In October 2011, it increased the extent and quantity of disclosures to be made by Indian corporate promoters. [21] In light of the global meltdown, it liberalised the takeover code to facilitate investments by removing regulatory structures. In one such move, SEBI has increased the application limit for retail investors to ₹200,000 (US$2,500) from ₹100,000 (US$1,300) at present. [22]
On the occasion of World Investor Week 2022, SEBI Executive Director Shri G. P. Garg launched a book on Financial Literacy. This book is a joint effort between Metropolitan Stock Exchange of India Limited and CASI New York. [23] [24]
Supreme Court of India heard a Public Interest Litigation (PIL) filed by India Rejuvenation Initiative that had challenged the procedure for key appointments adopted by Govt of India. The petition alleged that, "The constitution of the search-cum-selection committee for recommending the name of chairman and every whole-time members of SEBI for appointment has been altered, which directly impacted its balance and could compromise the role of the SEBI as a watchdog." [25] [26] On 21 November 2011, the court allowed petitioners to withdraw the petition and file a fresh petition pointing out constitutional issues regarding appointments of regulators and their independence. The Chief Justice of India refused the finance ministry's request to dismiss the PIL and said that the court was well aware of what was going on in SEBI. [25] [27] Hearing a similar petition filed by Bengaluru-based advocate Anil Kumar Agarwal, a two judge Supreme Court bench of Justice Surinder Singh Nijjar and Justice HL Gokhale issued a notice to the Govt of India, SEBI chief UK Sinha and Omita Paul, Secretary to the President of India. [28] [29]
Further, it came into light that Dr. K. M. Abraham(the then whole time member of SEBI Board) had written to the Prime Minister about malaise in SEBI. He said, "The regulatory institution is under duress and under severe attack from powerful corporate interests operating concertedly to undermine SEBI". He specifically said that Finance Minister's office, and especially his advisor Omita Paul, were trying to influence many cases before SEBI, including those relating to Sahara Group, Reliance, Bank of Rajasthan and MCX. [30] [31]
Several major financial scams have shaken the Indian market, like the Satyam scam, IL&FS crisis, Punjab National Bank Scam, and NSE co-location scam Critics argue that SEBI failed to properly monitor these companies or take timely action when irregularities were noticed. [32] [33] There have been instances where market intermediaries engaged in fraudulent activities, which resulted in significant losses for investors. [33] [34] SEBI’s monitoring of these intermediaries has been called into question. SEBI has been criticized for its inability to effectively regulate and prevent insider trading, despite having regulations in place. There have been numerous cases where insider trading went undetected for long periods. [33] Some believe SEBI hasn't done enough to prevent companies from issuing IPOs (Initial Public Offerings) at inflated prices, which hurts regular investors. [35] [36]
Market manipulation is an ongoing concern in the Indian stock market, particularly with small-cap and mid-cap stocks, which are more susceptible due to lower trading volumes, less liquidity, and limited market analyst coverage Pump and dump schemes are a prevalent form of manipulation, where false or misleading statements are used to inflate a stock’s price before the manipulators sell off their shares at a profit, leading to significant losses for unsuspecting investors. [37] [38] [39]
The Securities and Exchange Board of India (SEBI) has been criticized for not being able to prevent such manipulations effectively. Reasons include limited resources, reliance on stock exchanges for market data, a lack of a comprehensive legal framework with stringent penalties, slow response times, and a lack of coordination with other regulatory bodies. [40] [41]
SEBI in its circular dated May 30, 2012 gave exit – guidelines for Securities exchanges. This was mainly due to illiquid nature of trade on many of 20+ regional Securities exchanges. It had asked many of these exchanges to either meet the required criteria or take a graceful exit. SEBI's new norms for Securities exchanges mandates that it should have minimum net-worth of ₹ 1 billion and an annual trading of ₹ 10 billion. The Indian Securities market regulator SEBI had given the recognized Securities exchanges two years to comply or exit the business. [42]
Following is an excerpt from the circular: [43]
SEBI regulates Indian financial market through its 20 departments. [44]
SEBI Departments |
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BSE Limited, also known as the Bombay Stock Exchange (BSE), is an Indian stock exchange which is located on Dalal Street, known as the Wall Street of Mumbai, in turn described as the New York of India. Established in 1875 by cotton merchant Premchand Roychand, it is the oldest stock exchange in Asia, and also the tenth oldest in the world. The BSE is the world's 7th largest stock exchange with a market capitalization exceeding US$5 trillion as of May 2024.
National Stock Exchange of India Limited (NSE) is one of the leading stock exchanges in India, based in Mumbai. NSE is under the ownership of various financial institutions such as banks and insurance companies. It is the world's largest derivatives exchange by number of contracts traded and the third largest in cash equities by number of trades for the calendar year 2022. It is the 8th largest stock exchange in the world by total market capitalization, as of May 2024. NSE's flagship index, the NIFTY 50, a 50 stock index is used extensively by investors in India and around the world as a barometer of the Indian capital market. The NIFTY 50 index was launched in 1996 by NSE.
Ketan Parekh is a former stockbroker from Mumbai, who was convicted in 2008 for involvement in the Indian stock market manipulation scam that occurred from late 1998 to 2001. During this period, Parekh artificially rigged prices of certain chosen securities, using large sums of money borrowed from banks including the Madhavpura Mercantile Co-operative Bank, of which he himself was a director.
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information. The setups are generally made to result in monetary gain for the deceivers, and generally result in unfair monetary losses for the investors. They are generally violating securities laws.
Inter-connected Stock Exchange Ltd. (ISE) is an Indian national-level stock exchange. under the ownership of Ministry of Finance, Government of India. It is responsible for providing trading, clearing, settlement, risk management and surveillance support to its trading members. It started its operation in 1998 in Vashi, Mumbai, and has 841 trading members, who are located in 18 cities. These intermediaries are administratively supported through the regional offices at Delhi, Kolkata, Patna, Ahmedabad, Coimbatore and Nagpur, besides Mumbai.
Bangalore Stock Exchange (BgSE), was a public stock exchange based in Bangalore, India fully owned by Government of India. It was founded in 1963 and had 595 regional and non-regional companies listed. In September 2005, the BgSE announced plans to go public by divesting at least 51% of its ownership. The stock exchange was managed by a Council of Management, consisting of members appointed by the Securities and Exchange Board of India. It was the first stock exchange in South India to start electronic trading of securities in 1996.
Cochin Stock Exchange was an Indian stock exchange in Kochi, Kerala fully owned by Government of India. It was incorporated in 1978. At its peak, it had almost 500 Indian companies listed, and with a daily turnover of ₹70–₹100 crore, it was the fourth largest exchange in India.
The National Spot Exchange Limited (NSEL) is India's first spot exchange under the ownership of 63 Moons Technologies. It was established in view of the then Prime Minister's vision to create a "single market" across the country for both manufactured and agricultural produce.
Qualified institutional placement (QIP) is a capital-raising tool, primarily used in India and other parts of southern Asia, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a qualified institutional buyer (QIB).
The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched the Unit Trust of India (UTI). Mutual funds are broadly categorised into three segments: equity funds, hybrid funds, and debt funds.
National Institute of Securities Markets (NISM) is an Indian public trust and also the national apex body for the regulation and licensing of financial market dealing profession in India along with being the central civil service staff training institute of SEBI established in 2006 by the Securities and Exchange Board of India (SEBI) the regulator for the securities market in India. It is under the ownership of the Securities and Exchange Board of India, Ministry of Finance, Government of India.
Sandeep Parekh, born 1971, is an Indian financial sector lawyer who founded Finsec Law Advisors, Mumbai. He attended St. Columba's School in New Delhi, India. He then attended Hindu College at Delhi University, which gave him a distinguished alumni award in 2008. 10. He then obtained a degree in law from Delhi University Law Centre II, which also recognised him as a distinguished alumni in 2007. He was profiled in 2006 by CNBC in its program 'Young Turks' by Shereen Bhan as a young leader.
National Spot Exchange Limited (NSEL) case relates to a payment default at the National Spot Exchange Limited that occurred in 2013 involving Financial Technologies India Ltd, when a payment default took place after a commodities market regulator, the Forward Markets Commission (FMC), directed NSEL to stop launching contracts. This led to the closure of the Exchange in July 2013.
The India International Exchange Limited (India INX) is India's first international stock exchange which is launched as a subsidiary of the Bombay Stock Exchange (BSE). It is located at the International Financial Services Centre, GIFT City in Gujarat.
Karvy Group is a financial services company in India. It was involved in financial services like equity, commodities trading, depository and wealth services and distribution of other financial products. It has its headquarters in Hyderabad. It also had branch offices outside India in Bahrain, Dubai, Malaysia, Philippines and the United States. Scams perpetrated during 2019 involving Karvy Stock Broking Limited (KSBL), a group company led to the filing of criminal cases against the Chairman and others. This led to the banning of KSBL by the regulator.
The NSE co-location scam relates to the market manipulation at the National Stock Exchange of India, India's leading stock exchange. Allegedly select players obtained market price information ahead of the rest of the market, enabling them to front run the rest of the market, possibly breaching the NSE's purpose of demutualisation exchange governance and its robust transparency-based mechanism. The alleged connivance of insiders by rigging NSE's algo-trading and use of co-located servers ensured substantial profits to a set of brokers. This widespread market fraud came to light when markets' regulator, the Securities and Exchange Board of India (SEBI), received the first anonymous complaint through a whistle-blower's letter in January 2015. The whistle-blower alleged that trading members were able to capitalise on advance knowledge by colluding with some exchange officials. The overall default amount through NSE's high-frequency trading (HFT) is estimated to be ₹500 billion over five years.
Circular trading is a type of securities fraud that can take place in stock markets, causing price manipulation and often related to pump and dump schemes. Circular trading occurs when identical buy and sell orders are entered at the same time with the same number of shares and the same price. As a result, there is no change in ownership of shares, but there is the appearance of an increased trade volume. Circular trading can be achieved by several parties colluding to achieve the fraudulent outcome. This is not to be confused with wash trading, which is where the same outcome is achieved but occurs through the actions of one investor, rather than a group.
The 1992 Indian stock market scam was a market manipulation carried out by Harshad Shantilal Mehta with other bankers and politicians on the Bombay Stock Exchange. The scam caused significant disruption to the stock market of India, defrauding investors of over ten million USD.
Madhabi Puri Buch is the chairperson of the securities regulatory body Securities and Exchange Board of India (SEBI). She is the first woman chairperson to lead SEBI.
Financial regulation in India is governed by a number of regulatory bodies. Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and integrity of the financial system. This may be handled by either a government or non-government organization. Financial regulation has also influenced the structure of banking sectors by increasing the variety of financial products available. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices and case law.
The objective of this memorandum is to (i) update the Board on the setting up and operationalising of Investors' Service Centres (ISCs) by the two leading Stock Exchanges, viz., NSE and BSE out of their own resources/Investor Service Fund (ISF), in 50 different cities and towns of India with SEBI's active association and participation in such ISCs and (ii) seek approval for phasing out 16 out of 17 Local Offices of SEBI in those cities. Four Regional Offices and one Local Office would continue to operate.