(SEBI) Security Exchange Board of India and The Capital Market Regulations: A Critique

Introduction

The security exchange board of India (SEBI) was created to safeguard the interests of investors and traders in the Indian stock market by promoting the growth and regulation of the equity market and by ensuring a healthy atmosphere in securities. Furthermore, one of the primary reasons for the establishment of the security exchange board of India (SEBI) was to avoid financial market misconduct in India.

(SEBI) The security exchange board of India is responsible for the three most essential financial market participants in order to accomplish its goals. The following are SEBI’s primary responsibilities in the Indian financial market

  1. Issuer of securities: These are companies that are listed on the stock exchange and raise money by issuing shares.  security exchange board of India (SEBI) assures that initial public offerings (IPOs) and Follow-on Public Offers (FPOs) are handled in an open and healthy manner.
  2. Protectors of the traders and investors: The capital market is only able to operate because traders exist. security exchange board of India (SEBI) is in charge of making sure that investors are not defrauded in the stock market or manipulated .
  3. Financial Intermediaries: They operate as intermediaries in the securities market, ensuring that stock market transactions go smoothly and securely. SEBI is responsible for overseeing the activity of stock market intermediaries like brokers and sub-brokers.”

SEBI and Its Functions

“In order to carry out its responsibility, SEBI performs three important functions:

  1. Protective Function: The protective functions of SEBI are designed to protect the interests of investors and financial institutions. Protective functions include avoiding price rigging, preventing insider trading, supporting fair practises, raising investor knowledge, and outlawing fraudulent and unfair trade practises. The safeguarding functions of SEBI are designed to protect the interests of investors and financial institutions.
  2. Regulatory Functions: Financial market intermediary are regulated by the security exchange board of India(SEBI). SEBI  sets standards and a code of practice, as well as regulating mergers, acquisitions, and takeovers. Stock exchanges are also inspected and audited by SEBI. There are many finance experts that use it like a registrar for brokers and sub-brokers. The credit rating agencies are governed by SEBI.
  3. Development Functions:One of SEBI’s development responsibilities is to educate financial intermediaries. SEBI is committed to promoting integrity in the marketplace and eliminating fraud and abuse. The IEPF (Investor Education and Protection Fund) is for fostering and safeguarding the interests of investors. Resources are also used to instruct and enlighten investors about the stock market.

SEBI and Unfair Trade Practices: An Analysis

Unfair business tactics in the securities market are not only considered unlawful, but also an unethical practice that degrades investors’ confidence in the stock market. “Legislation that punishes those who manage securities relying on unpublished, cost-sensitive information seems to be in place in the majority of industrialised nations, making it unlawful to do so in such countries.

India has recently joined this arena through a quasi-legislative level in the form of SEBI’s Insider Trading Regulation 1992, SEBI’s False and Out of Line Exchange Homes relating to Securities Market Direction 1995, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to securities market) Regulations, 1995. The effectiveness of these Controls will, of course, be determined by how well they are implemented, and whether or not such implemented instructions can help to curb the spread of such practises.

Regulations and Rights of the SEBI

Without prejudice to its rights, the security exchange board of India (SEBI) may begin criminal proceedings under Section 24 of the SEBI Act, 1992, or take any other action to ensure that the SEBI Act and its rules are strictly observed. An appeal can be filed with the Securities Appellate Tribunal, if any individual is dissatisfied with a decision granted by SEBI.

The rights of SEBI in this respect may be summarised as follows:

  • Making it illegal to dispose any security obtained in contravention of these regulations.
  • Refusing to interact with or advise anybody about trading in securities.
  • Declare the transactions/trading to be “null and void.”
  • Requiring the parties who obtained the securities in contravention of these restrictions to return them to the seller.
  • If a buyer is unable to deliver such securities, the market price at the time of giving such directive or at the time of transaction, whichever is greater, should be paid to the seller.
  • Requiring the person who violated this rule by dealing in securities to transfer to the Investor Protection an amount equal to or greater than the cost price or market price of securities , whichever is higher.

Conclusion

Many frauds and malpractices occurred in the Indian stock market prior to the establishment of SEBI. The “Harshad Mehta scam” was a well-known Indian stock market fraud. Following the establishment of SEBI, the stock market began to improve and become more transparent. Despite this, certain securities mark frauds have occurred after SEBI took office. The “Ketan Parekh scam” is a well-known case.

Even if unethical practises still occur in the Indian capital market today, they are much less prevalent. Furthermore, the legislation and regulations governing the security market are amended on a regular basis. As a result, SEBI’s authority is becoming more strict with time. As a result, it can be concluded that the SEBI plays a critical role in the proper functioning of India’s capital market, ensuring that investors’ hard-earned money generates a good return with minimal risk.

Author: Ananya Pande is a student at Hidayatullah National Law University, in case of any queries please contact/write back to us via email vidushi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

Leave a Reply

Categories

Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • September 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010