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Securities and Exchange Board of India (Sebi)

GS2/GS3

 Syllabus: Governance: Regulators/ GS-3: Indian Economy and Issues

 

Source: BS

 Context: The Securities and Exchange Board of India (Sebi) recently unveiled a new logo on the occasion of its 35th anniversary.

 

About SEBI:

SEBI has been successful in its functions:

FunctionExample of SEBI’s success
Protection of investors’ interestsSEBI has taken action against fraudulent collective investment schemes  to protect investors’ interests e.g., Action against the Sahara group (2013)
Impressive rise Assets under the management of mutual funds, the total number of dematerialised accounts, dematerialised turnover, the number of derivatives contracts, etc, have all grown exponentially.
The smooth functioning of the securities marketSEBI has introduced online trading platforms and electronic clearing services
Regulation of securities market operationsSEBI has introduced regulations for insider trading, delisting of securities, and disclosure and investor protection guidelines
Education of investorsSEBI‘s ‘Jan Jagruti Abhiyaan’ to educate investors about the securities market and their rights as investors.
Prohibition of fraudulent and unfair trade practicesSEBI has taken action against market manipulations and price rigging. In 2015, SEBI ordered a probe into suspected rigging of the National Stock Exchange’s (NSE) algo-trading systems and imposed a penalty of Rs 1,000 crore on NSE for its role in the co-location case.
Ensuring compliance by market participantsIn 2018, SEBI fined ICICI Bank and its CEO Chanda Kochhar for violating disclosure norms related to a loan given to Videocon Group.
Tackling insider tradingIn 2017, SEBI imposed a penalty on Reliance Industries for alleged insider trading in Reliance Petroleum shares in 2007.

  

Limitations of SEBI:

 SEBI has certain limitations in terms of its reach, enforcement powers, coordination with other regulatory bodies, resources, and keeping up with changing market dynamics. These limitations can create regulatory gaps and overlaps, leading to delays in the resolution of cases.

 

Examples:

  • SEBI’s alleged inaction in the Ketan Parekh scam and Satyam scandal
  • SEBI’s inability to prevent the NSEL scam
  • Failure of SEBI’s regulations to prevent the misuse of participatory notes (P-notes) by foreign investors

 

Conclusion:

There is a need for continuous monitoring and improving market intelligence to strengthen enforcement. Also, India’s financial markets are still segmented, and a unified financial regulator may be required to remove overlaps and excluded boundaries.

 

Insta Links

How is the stock market regulated in India?

 

Mains Links:

Discuss the powers and functions of SEBI. What are the major issues faced by the regulatory body for securities and commodity markets in India? Suggest reforms that are needed in its functioning. (250 Words)