The Securities and Exchange Board of India Act, 1992 (SEBI Act) is a legislation enacted in India to establish the Securities and Exchange Board of India (SEBI) as the regulatory authority for the securities market. SEBI is responsible for regulating and promoting the development of the securities market in the country. Here is an overview of the SEBI Act, 1992:
1. Establishment of SEBI: The SEBI Act establishes the Securities and Exchange Board of India as a statutory regulatory body for the securities market in India. It defines the composition and structure of SEBI, including the appointment and tenure of the chairman and other members.
2. Regulatory Functions: The SEBI Act empowers SEBI to regulate and oversee various aspects of the securities market. It includes functions such as regulating the issuance and trading of securities, registering and regulating stockbrokers, sub-brokers, and other market intermediaries, promoting investor education and protection, and regulating the functioning of stock exchanges and clearing corporations.
3. Powers and Enforcement: The SEBI Act grants SEBI wide-ranging powers to carry out its regulatory functions effectively. These powers include the ability to issue regulations, guidelines, and circulars, conduct inspections and investigations, impose penalties and sanctions for violations, and take legal action against entities engaged in fraudulent or manipulative practices in the securities market.
4. Investor Protection: The SEBI Act places a strong emphasis on investor protection. SEBI is tasked with promoting fair practices and ensuring the integrity and transparency of the securities market. It establishes mechanisms for addressing investor grievances, such as the establishment of Investor Protection Funds, Investor Education and Protection Fund, and mandatory disclosures by listed companies.
5. Market Intermediaries: The SEBI Act regulates various market intermediaries, including stockbrokers, sub-brokers, portfolio managers, investment advisers, and other entities involved in the securities market. It sets out the eligibility criteria, registration requirements, and code of conduct for these intermediaries to ensure professionalism and ethical practices in their operations.
6. Prohibition of Insider Trading: The SEBI Act prohibits insider trading, which involves trading in securities based on non-public, price-sensitive information. SEBI is responsible for enforcing the provisions related to insider trading and has the authority to investigate and penalize those involved in such activities.
7. Market Surveillance and Enforcement: The SEBI Act provides for market surveillance and enforcement mechanisms to ensure compliance with securities laws and regulations. SEBI has the power to monitor and supervise the securities market, conduct investigations, and take appropriate actions to curb market manipulation, fraud, and other irregularities.
8. Appeals and Appellate Tribunal: The SEBI Act establishes the Securities Appellate Tribunal (SAT) as an appellate authority to hear and dispose of appeals against SEBI’s orders and decisions. SAT provides an independent forum for aggrieved parties to challenge SEBI’s actions and decisions.
The SEBI Act, 1992 has undergone amendments over time to adapt to changing market dynamics and address emerging issues in the securities market. It plays a crucial role in ensuring the fair and efficient functioning of the securities market in India, protecting the interests of investors, and maintaining market integrity.