SECURITIES AND EXCHANGE BOARD OF

INDIA (1992)
SEBI is a statutory regulatory body established on the 12th of April,
1992. It monitors and regulates the Indian capital and securities market
while ensuring to protect the interests of the investors, formulating
regulations and guidelines. The head office of SEBI is at Bandra Kurla
Complex, Mumbai.

STRUCTURE OF SEBI
o One chairman, who is appointed by the Union Government of India

o Two board members who are officers from the Union Ministry of
Finance

o One board member from the Reserve Bank of India

o Five members nominated by the Union Government of India, out of

which at least three shall be whole-time members

FUNCTIONS OF SEBI
SEBI primarily has three types of functions:

o Protective functions

o Regulatory functions

o Developmental functions

Let’s look into these functions in a little more detail.

Protective functions

SEBI performs these functions to protect the interests of traders,

investors and other participants in the financial markets. The role of
SEBI in the protective sphere includes:

o Keeping a checking on price rigging

o Prohibiting insider trading

 o Preventing unfair and fraudulent trade practices

o Promoting fair practices

o Educating and creating awareness among investors

Regulatory functions

SEBI’s regulatory functions help the statutory body keep a check on how
the business in the markets is carried out. The role of SEBI in the
regulatory sphere includes:

o Registration of brokers, sub-brokers and merchant bankers,

among others

o Regulating the takeover of companies

o Conducting inquiries and audit of stock exchanges

o Designing guidelines and for the proper functioning of financial

intermediaries

o Registering and regulating credit rating agencies

Developmental functions

SEBI not only regulates the markets, but it also has a keen interest in
developing them. That’s why its functions also include developmental
roles. The role of SEBI in the developmental front includes:

o Training and education financial intermediaries

o Conduction of research work

o Promotion of fair-trading practices

o Developing and promoting activities in stock exchanges

o Encouraging self-regulating organisations

OBJECTIVES OF SEBI
Following are some of the objectives of the SEBI:
1. Investor Protection: This is one of the most important objectives of
setting up SEBI. It involves protecting the interests of investors by
providing guidance and ensuring that the investment done is safe.

2. Preventing the fraudulent practices and malpractices which are

related to trading and regulation of the activities of the stock exchange

3. To develop a code of conduct for the financial intermediaries such as

underwriters, brokers, etc.

4. To maintain a balance between statutory regulations and self

regulation.

AUTHORITIES AND POWER OF SEBI

Quasi-judicial powers:

These powers give SEBI the authority to conduct hearings and pass
judgements in case there are any fraudulent or unethical trading
practices in place. By exercising these powers, SEBI can ensure that
there’s transparency and fairness in the capital markets.

Quasi-legislative powers:

With these powers, SEBI can draft rules and regulations to protect
intermediaries or investors like you. It also helps reduce chances of any
malpractices or fraudulent trading activities occurring.

Quasi-executive powers:

The quasi-executive powers of SEBI allow it to inspect the books of

accounts and other documents of parties in case of any traces of any
suspicious activity. They also allow the regulatory body to file a
case against anyone who violates SEBI regulations and rules.

SEBI GUIDELINES FOR ISSUE OF SHARES

TO THE PUBLIC
 Initial Public Offering (IPO): Companies planning to go public
must comply with SEBI’s guidelines for IPOs. These guidelines
 require the company to prepare a prospectus containing all the
relevant information about the company, its financials, risk
factors, and proposed use of funds.

 Disclosures and Investor Protection: This includes

disclosing financial statements, future prospects, risks
involved, and any other material information that may affect
investment decisions. Companies are also required to follow
corporate governance practices and appoint independent
directors to safeguard the interests of minority shareholders.

 Minimum Public Shareholding: As per the guidelines,

companies must have a minimum public shareholding of 25%.
This ensures that a reasonable portion of the company’s
shares is available for trading in the open market, promoting
liquidity and transparency.

 Book Building Process: Under this process, the company

and its underwriters determine a price range within which
investors can bid for shares. The final price is determined
based on the demand and supply dynamics of the shares.

 Timely Disclosures and Reporting: This includes submitting

quarterly financial results, annual reports, and promptly
informing the stock exchanges about any material
developments or events that could impact the company’s
share price.

 Prohibition of Insider Trading: Companies must establish

robust systems to prevent insider trading and ensure that all
employees and related parties are aware of their obligations
and comply with insider trading regulations.

SEBI GUIDELINES FOR ISSUE OF

DEBENTURES TO THE PUBLIC
The key SEBI guidelines for issue of debentures in India are as follows:

1. Credit Rating Requirement:

  Debt instruments must be rated by a Credit Rating Agency, and
this rating must be disclosed in the offer document.
 For issues equal to or greater than 100 crores, two ratings from
two different credit rating agencies are required.
 Recognised credit rating agencies in India include CRISIL, ICRA,
and CARE.
2. Debt-Equity Ratio:
The debt-equity ratio for debenture issuance must not exceed 2:1,
except for capital-intensive projects, where this condition can be relaxed.

3. Purposes for Debenture Issuance:

Debentures may be issued for various purposes, including starting new
undertakings, expansion, diversification, modernisation, amalgamation,
asset acquisition, capital restructuring, and long-term finance resource
enhancement.

4. Limitation on Debenture Issue:

The issue of debentures should not exceed 20% of the gross current
assets, including loans and advances.

5. Redemption Period:
Redemption of debentures cannot commence before 7 years from the
commencement of the company.

6. Payment in Instalments:
Small investors with debentures valued at Rs. 5,000 or less can receive
payments in one instalment.

7. Conversion of Non-Convertible Debentures:

Non-Convertible Debentures can be converted into equity with the
consent of SEBI.

8. Premium on NCDs:
A premium of 5% on the face value is allowed for non-convertible
debentures during redemption.

9. Secured Debentures for Public Subscription:

Secured debentures are permitted for public subscription.

10. Face Value and Listing:

The face value of debentures must be Rs. 100, and they should be listed
on one or more stock exchanges in India.
11. Appointment of Debenture Trustees:
Debenture trustees must be appointed for debentures with a maturity
period exceeding 18 months, and their names should be mentioned in
the offer document.

12. Debenture Redemption Reserve:

Companies issuing debentures must create a Debenture Redemption
Reserve to protect the interests of investors against the risk of default. If
a reserve is not created within 12 months of issuing the debentures,
the company is liable to pay a 2% interest penalty to debenture holders.

13. Listing of Debt Instruments Before Equity:

SEBI allows the listing of debt instruments before equity if the rating of
the instrument is not below a minimum rating of ‘A’ or its equivalent.

14. Fully Convertible Debentures (FCDs):

FCDs with a conversion period of more than 36 months are not allowed
unless conversion is made optional, providing the right to buy or sell the
stock at a certain price or the obligation to buy or sell the stock at a
certain price.
These SEBI guidelines for issue of debentures in India aim to ensure
transparency as well as efficient regulation of debenture issuances in
India’s financial markets. Companies must adhere to these set of SEBI
guidelines for issue of debentures in India when raising funds through
debentures to maintain the integrity and stability of the financial system.

ROLE OF SEBI IN INVESTOR

PROTECTION
SEBI has given out various methods and measures to ensure the
investor protection from time to time. It has published various directives,
driven many investor awareness programmes, set up investor protection
Fund (IPF) to compensate the investors. We will look into the investor
protection measures by SEBI in detail:

To begin with, SEBI constructs the limit of financial backers through

instruction and attention to empower a financial backer to take educated
choices. SEBI tries to guarantee that the financial backer gets the hang
of contributing. In simpler words, SEBI ensures that the investor gets
and utilizes data needed for contributing and assesses different
speculation alternatives to suit his particular objectives.
 It helps the investor find out his privileges and commitments in a specific
venture, bargains through enlisted mediators, plays it safe, looks for help
if there should be an occurrence of any complaint, and so on.

SEBI has been putting together financial backer schooling and

mindfulness workshops through financial backer affiliations and market
members, and has been urging market members to sort out comparable
projects.

It keeps a refreshed, far reaching site for training of financial backers. It

distributes different sorts of alerts through media. It reacts to the
questions of financial backers through phone, messages, letters, and
face to face for the individuals who visit SEBI office.

Secondly, SEBI makes everything of interest accessible in public

domain. SEBI has received revelation based administrative system.
Under this structure, backers and go-betweens unveil applicable insights
concerning themselves, the items, the market and the guidelines so the
financial backer can take educated venture choices dependent on such
divulgences. SEBI has endorsed and screens different introductory and
persistent exposures.

Thirdly, SEBI guarantees that the market has frameworks and practices
which make exchanges safe. SEBI has taken different estimates, for
example, screen based exchanging framework, dematerialization of
protections and outlined different guidelines to direct delegates. It has
also issued an exchange of protections, corporate rebuilding, etc. to
ensure the interests of financial backers in protections. It additionally
guarantees that only legitimate people are permitted to work on the
lookout, each member has motivation to agree with the recommended
principles, and the defaulters are granted praiseworthy discipline.

Lastly, SEBI encourages a redressal of financial backer complaints.

SEBI has a far-reaching system to encourage redressal of financial
backer complaints against middle people and recorded organizations. It
circles back to the organizations and middle people who don't change
financial backers' complaints, by sending suggestions to them and
having gatherings with them. It makes proper implementation moves as
given under the law (counting dispatch of settling, indictment
procedures, bearings) where progress in redressal of financial backer
complaints isn't good. It has set up a complete mediation instrument in
stock trades and vaults for goal debates of the financial backers. The
stock trades have financial backer security assets to remunerate
financial backers when a dealer is pronounced a defaulter. Store repays
financial backers for misfortune because of carelessness of storehouse
or safe member.

INVESTOR PROTECTION MEASURES OF

SEBI
Investor protection legislation is implemented under the Section 11(2) of
the SEBI Act. The measures are as follows:

 Stock Exchange and other securities market business regulation.

 Registering and regulating the intermediaries of the business like
brokers, transfer agents, bankers, trustees, registrars, portfolio
managers, investment consultants, merchant bankers, etc.
 Recording and monitoring the work of custodians, depositors,
participants, foreign investors, credit rating agencies, etc.
 Registering investment schemes like Mutual fund & venture
Capital funds, and regulating their functioning.
 Promotion and controlling of self-regulatory companies. Keeping a
check on frauds and unfair trading methods related to the
securities market.
 Observing and regulating major transactions and take-over of the
companies.
 Carry out investor awareness and education programme.
 Train the intermediaries of the business.
 Inspecting and auditing the security exchanges (SEs) and
intermediaries.
 Assessment of fees and other charges.