Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) was established by the Government of India on 12 April 1988 as an interim administrative body to promote the orderly and healthy growth of the securities market and to protect investors, functioning under the Ministry of Finance. It was given statutory status on 30 January 1992 through an ordinance, which was later replaced by an Act of Parliament — the Securities and Exchange Board of India Act, 1992.

Reasons for the establishment of SEBI

The capital market witnessed tremendous growth during the 1980s, marked by increasing participation by the public. This ever-expanding investor population and market capitalisation led to a variety of malpractices on the part of companies, brokers, merchant bankers and others — self-styled merchant bankers, unofficial private placements, rigging of prices, unofficial premiums on new issues, non-adherence to the provisions of the Companies Act, violation of stock-exchange rules and listing requirements, and delays in the delivery of shares. These unfair practices eroded investor confidence and multiplied grievances, while the government and the exchanges were largely helpless because of the lack of proper penal provisions. The government therefore decided to set up a separate regulatory body — SEBI.

Purpose and role of SEBI

The basic purpose of SEBI is to create an environment that facilitates the efficient mobilisation and allocation of resources through the securities market, and to stimulate competition and encourage innovation. This environment is meant to serve the three groups that constitute the market: …