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What is SEBI Regulatory Framework?

by Tom
What is SEBI Regulatory Framework?

Investing in securities has become one of the most prominent investment pathways taken today. Given all this, the Security and Exchange Board of India is the most crucial regulator of these securities in the country. It is the counterpart of the Securities and Exchange Commission in the US. 

Do you know what the objective of SEBI is? It is to safeguard the interest of the investors in securities and to promote the development of and to regulate the securities market – and also for matters connected therewith or incidental thereto.

What is SEBI?

SEBI was established in its current incarnation in April 1992, followed by the base of SEBI Act by the country’s parliament. It had supplanted the controller of Capital Issue that had regulated the securities markets under the Capital Issues Act of 1947 – passed months before India had gotten its Independence.

The Securities and Exchange Board is headquartered in the Business district at Bandra-Kurla Complex in Mumbai, with regional offices in other places. All indexes like NIFTY midcap 100, BSE Sensex, BSE SmallCap, and more follow the regulations of SEBI; for a better understanding, you can just read further.

Charter of SEBI

Based on the charter, SEBI is known to be responsible for three main categories, and they are:

  • Security Issuers
  • Investors
  • Market Intermediaries

The body would draft regulations and statutes in a regulatory capacity, pass the ruling and other orders in a judicial capacity, conduct investigations, and impose penalties in an enforcement capacity.

SEBI is run by the board of directors; this is inclusive of the chair who is elected by our parliament, two officers from the Finance Ministry, one member RBI, and five members that are also elected by the parliament. 

Now, let us find out more about the regulatory framework of SEBI in depth.

What Does SEBI Really Do?

  • SEBI, as already mentioned, was set up to protect the interests of the investors in the security market.
  • It enhances and promotes the development of the securities market and regulates the business.
  • It regulates the operations of the depositories, participants, security custodians, and more.
  • SEBI gives a platform for the stockbrokers, sub-stockbrokers, investment advisers, bankers, merchant bankers, and more to register and regulate work.
  • It also takes care of the research and development to make sure the securities market is efficient at all times.
  • It prohibits insider trading. Insider trading means fraudulent and unfair trade practices that are related to the securities market.
  • It makes sure that the investor is educated on the intermediary of the securities market.
  • It monitors substantial acquisitions of the shares and the take-over of companies. 

How Much Power Does SEBI Hold?

Well, you must know that SEBI has three main powers – let’s get to know them, shall we?

1. Quasi-Judicial: SEBI has the power to deliver a judgment that is associated with fraud and other unethical practices in the context of the securities market. It assists in making sure fairness, transparency, and accountability in the stock market.

2. Quasi-Executive: SEBI has been empowered to implement the regulations and judgment that is made and to also take up the legal actions needed against the violators. It is also authorized to inspect the books of accounts and other documents when it comes to a violation.

3. Quasi-Legislative: SEBI reserves the right to frame rules and regulations that can protect the interests of the investor. Some regulations of SEBI are insider trading regulations, listing obligations, and disclosure needs. They have been formulated to keep malpractices at bay. Despite the power – the results of SEBI need to go through the Securities Appellate Tribunal and the Supreme Court of India.

But, apart from all of this, there are various criticisms to SEBI too. The critics say that SEBI lacks transparency and is insulated from direct public accountability. The only mechanisms to know its power are a Securities Appellate Tribunal that consists of a panel of three judges and also the supreme court of India. Both the bodies have sometimes censored SEBI.

Still – SEBI has been aggressive at times while doling out punishment and issuing strong reforms. It also incorporated the Financial Stability Board in the year 2009 in response to the global financial crisis – giving the board a much broader mandate than its predecessor to promote financial stability.

When you begin to invest in the market of securities, you are already probably doing a lot of research and work on how to get started, what strategy to use, and most importantly, how to succeed in this competitive market. The same applies when you have to know about the different components of this system. Though SEBI does not come under the components of the security market – it is a crucial point you have to notice. 

So, make sure you know about the most important regulating body in this market – even before you can get started. 


SEBI is quite a crucial point that you will have to know when it comes to trading or investing in the security market. The more you know about it – the better your experience in this market.

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