Securities and Exchange Board of India (SEBI) – Functions & Challenges

Index

Introduction
Objectives of SEBI
Functions of SEBI
- Protective Functions
- Regulatory Functions
- Developmental Functions
Challenges Faced by SEBI
Conclusion
References

1. Introduction

The Securities and Exchange Board of India (SEBI) was established on 12th April 1988 as a non-statutory body and later given statutory powers on 30th January 1992 under the SEBI Act, 1992. Its primary purpose is to regulate the Indian securities market and protect investors’ interests. As the capital market regulator, SEBI plays a crucial role in ensuring fair practices, transparency, and stability in the financial system.

2. Objectives of SEBI

To protect the interests of investors in securities.
To promote the development of the securities market.
To regulate the functioning of stock exchanges and intermediaries.
To prevent malpractices and ensure fair trading practices.
To create a healthy environment for capital formation.

3. Functions of SEBI

(a) Protective Functions

Prohibiting insider trading and unfair trade practices.
Educating and guiding investors.
Promoting fair practices in securities markets.
Providing a grievance redressal mechanism for investors.

(b) Regulatory Functions

Regulating stock exchanges and intermediaries.
Registering and supervising brokers, mutual funds, and other intermediaries.
Regulating mergers, acquisitions, and takeovers.
Monitoring substantial shareholding and company disclosures.
Enforcing corporate governance norms.

(c) Developmental Functions

Promoting training of intermediaries.
Conducting research and publishing market information.
Encouraging innovation in securities instruments.
Promoting investor awareness programs.
Facilitating electronic trading and settlement systems.

4. Challenges Faced by SEBI

Insider Trading & Market Manipulation – Detecting and proving insider trading remains difficult due to sophisticated methods used.
Technological Advancements – High-frequency trading and algorithmic trades demand advanced monitoring mechanisms.
Globalization of Markets – Cross-border transactions and foreign investments pose jurisdictional and regulatory challenges.
Corporate Governance Issues – Ensuring ethical practices and accountability in corporates remains a concern.
Balancing Regulation with Growth – Over-regulation may hinder market innovation, while under-regulation may harm investor trust.
Awareness Gap Among Retail Investors – Lack of financial literacy leads to investor vulnerability.
Cybersecurity Risks – Digital trading platforms are prone to hacking, data theft, and fraud.

5. Conclusion

SEBI has emerged as a strong regulator that has brought transparency, efficiency, and growth to the Indian securities market. Despite several challenges, it continues to evolve with technological and policy innovations. Strengthening SEBI’s autonomy, enhancing surveillance systems, and increasing investor education can further boost its effectiveness in ensuring a fair and robust capital market.

6. References

Securities and Exchange Board of India Act, 1992
Official Website of SEBI: https://www.sebi.gov.in
Financial Management textbooks (Prasanna Chandra, I.M. Pandey)
Journals and articles on Indian Securities Market