UNIT – IV

Securities and Exchange Board of India

[ SEBI ]
SEBI stands for the Securities and Exchange Board of India. It is a statutory
body established by the Government of India in 1992 to protect the interests
of investors investing in securities, along with regulating the securities market.
SEBI’s regulatory authority extends to various segments of the financial
market, including stock exchanges, mutual funds, portfolio managers,
investment advisers, and other intermediaries. It plays a pivotal role in
monitoring and regulation, market activities, ensuring compliance with
regulations, and taking corrective measures in case of any violations.
 The Securities and Exchange Board of India [SEBI] serves as the principal
regulator of the securities market in India tasked with fostering investor
confidence, maintaining market integrity, and promoting the orderly
growth and development of the capital markets. Its proactive regulatory
approach and emphasis on investor protection are essential for ensuring
the efficient and transparent functioning of India financial ecosystem.

Objectives of SEBI
The primary objectives of SEBI include:

1. Investor protection:
SEBI’s foremost objective is to safeguard the interests of investors in the
securities market. It seeks to ensure that investors receive accurate and
timely information about the securities they invest in and are protected
from fraudulent and unfair trade practices.
2. Regulation and development of the securities market:
SEBI’s is entrusted with the responsibility of regulating and developing the
securities market. It formulates regulations and guidelines that govern
various market participants, such as stock exchanges, brokers, and listed
companies, to promote fair and transparent practices.
3. Prevention of insider trading:
SEBI works towards preventing insider trading, a practice where individuals
with access to non-public information use it to gain an unfair advantage in
trading. SEBI’s regulations on insider trading aim maintain a level playing
field for all market participants.
4. Promotion of fair practices and code of conduct:
SEBI promotes fair practices and a high standard of integrity in the
securities market. It enforces a code of conduct for all market participants,
fostering an environment where market activities are conducted ethically
and transparently.
5. Prohibition of fraudulent and unfair trade practices:
SEBI is empowered to act against fraudulent and unfair trade practices in
the securities market. It investigates and takes corrective measures to
maintain market integrity and protect investors from market manipulations.
6. Development of a secondary market:
SEBI plays a crucial role in the development of the secondary market by
introducing reforms and initiatives to enhance liquidity, transparency, and
efficiency in trading. It works creating an environment conducive to the
growth of the capital market.

Organizational structure of SEBI

SEBI has over 20 departments, all of which are supervised by their respective
department heads, which in turn are administered by a hierarchy in general.
The regulatory body is managed by its members, which consist of the
following:
 The chairman is nominated by the Union Government of India.
 Two members from the Union Finance Ministry.
 One member from the Reserve Bank of India.
 The remaining five members are nominated by the Union government of
India.

SEBI has its headquarters in Mumbai and has regional offices in New Delhi,
Kolkata, Chennai and Ahmedabad, along with local offices in Jaipur and
Bangalore, and offices at Guwahati, Bhubaneswar, Patna, Kochi and
Chandigarh.
Functions of SEBI
The key functions include:

1. Safeguarding the interests of Indian investors, while educating them about

securities markets and their intermediaries.
2. Facilitating the development and seamless functioning of the securities
market.
3. Regulating the business operations within the securities market.
4. Providing a regulatory platform for portfolio managers, bankers,
stockbrokers, investment advisers, merchant bankers, registrars, share
transfer agent, and other market participants.
5. Overseeing and regulating the responsibilities of depositors, credit rating
agencies, custodians of securities, foreign portfolio investors, and other
involved entities.
6. Prohibiting fraudulent and unfair trade practices associated with the
securities market.
7. Monitoring company takeovers and acquisitions of shares.
8. Ensuring the efficiency and contemporary relevance of the securities
market through thorough research and developmental strategies.

Powers of SEBI
SEBI wields a spectrum of power the allow it to function effectively as a
regulatory authority. These powers can be categorized into three board
classification:

 Quasi - judicial power

 Quasi - executive power
 Quasi - legislative
 Quasi – judicial powers :
1. Adjudication authority:
o SEBI possesses quasi – judicial powers, allowing it to adjudicate on
matters related to securities law violations.
o It has the authority to conduct hearings, examine evidence, and pass orders,
ensuring a fair and impartial resolution of disputes within the securities market.
 2. Settlement proceedings:
o SEBI has the power to facilitate settlement proceedings between
parties involved in disputes.
o Through consent orders, SEBI can bring about resolution and
enforce compliance without resorting to prolonged legal processes.
 Quasi – executive powers:
1. Enforcement and implementation:
o SEBI is vested with quasi – executive power, enabling it to enforce
compliance with securities laws and regulations.
o The regulatory body can take actions such as imposing fines,
penalties, and other measures to ensure market participants
adhere to prescribed standards.
2. Conducting investigations:
o SEBI has the authority to conduct investigations into potential
violations of securities laws.
o This quasi – executive power allows SEBI to gather information,
inspect records, and take corrective measures to maintain market
integrity.
 Quasi – legislative powers:
1. Rule – making authority:
o SEBI possesses quasi – legislative powers, allowing it to formulate
and promulgate rules and regulations for the securities market.
o This authority enables SEBI to adapt to changing market dynamics
and enact measures that foster fair, transparent, and efficient
market practices.
2. Policy formulation:
o SEBI has the power to formulate policies that guide the
development and regulation of the securities market.
o This quasi – legislative role positions SEBO as a dynamic institution
capable of responding to emerging challenges and opportunities
in the financial landscape.
 Securities Appellate Tribunal
 Securities Appellate Tribunal is a statutory body developed under the
provisions of Section 15K of the Securities and Exchange Board of India Act.
Securities Appellate Tribunal was mainly established to hear an appeal
against the order passed by the SEBI (Securities and Exchange Board of
India) or by an adjudicating officer under the SEBI Act

 It is formed as a statutory and autonomous body as per the provisions of

the Securities and Exchange Board of India (SEBI) Act, 1992.

 It was mainly established to hear appeals against orders passed by the

SEBI or by an adjudicating officer under the SEBI Act.

 The SAT hears appeals against the following orders:

o Orders issued by the Insurance Regulatory and Development

Authority of India (IRDAI) in relation to cases filed before it.

o Orders issued by the Pension Fund Regulatory and Development

Authority (PFRDA) in relation to cases filed before it.

o Hear the orders passed by SEBI.

Composition of SAT
Securities Appellate Tribunal (SAT) would consist of the following:

 One presiding Officer

 Other members

Presiding Officer

The Central Government will appoint the presiding Officer of Securities

Appellate Tribunal in discussion with the chief justice of India or nominee. The
person so appointed as the presiding OfficerOfficer should meet with the
following requirements:

 The retired or sitting judge of the supreme court

  The retired or sitting judge of the high court

 The retired or sitting judge of the high court, who has completed at least
seven years of service as a judge in a high court.

Members

The Central Government will appoint the two members of the Securities
Appellate Tribunal. The member so appointed should possess the following
qualities:

 The member should be capable of dealing with problems related to

the securities market.

 The member should possess qualification and experience related to

corporate law, securities laws, economics, finance or accountancy.

 SAT has the same powers as vested in a civil court under the code of civil
procedure while trying a suit.

Power of Securities Appellate Tribunal (SAT)

The Securities Appellate Tribunal (SAT) will have the same powers as vested in
a civil court under the code of civil procedure while trying a suit, with respect
of the following matters namely:

 Enforce and summon the attendance of any person

 Require the discovery and production of documents

 Receive evidence on affidavits

 Issue commissions for the examination of the documents or witnesses

 Dismiss an application for default or deciding it ex-parte

 Set aside any order or dismissal of any application for default or any
other order passed by it ex-parte

 Any other matter as and when prescribed.

Who can make an appeal?
Every person aggrieved by order of the Securities and Exchange Board of India
or adjudicating officer is liable to make an appeal to the Securities Appellate
Tribunal (SAT). Note: No appeal can be made to the Securities Appellate
Tribunal (SAT) against any order made with the consent of the parties.

Time Limit
 Every appeal to the Securities Appellate Tribunal should be filed within 45
days from the day on which a copy of the order passed by the Securities
and Exchange Board of India or adjudicating office is received.
 The Securities Appellate Tribunal may allow an appeal after the expiry of
the specified period of 45 days if the reason for not filing the appeal with
the said period is satisfied.
 The appeal should be made in three copies along with the additional copies
for each additional appeal, and that should be signed by the authorized
person.
 On receipt of the appeal, the Securities Appellate Tribunal may confirm,
modify or set aside the order appealed against and such appeal should be
disposed of within 6 months from the date of receipt of such appeal.

Appeal against the orders of SAT

 Every person aggrieved by any order or decision of Securities Appellate
Tribunal can file an appeal to the Supreme Court. Also, the appeal only can
be made on any question of law.
 The appeal should be made within 60 days from the date of receiving a
copy of the order or decision of Securities Appellate Tribunal. However, the
Supreme Court may further allow a period of 60 days for making an appeal,
if it satisfied that the applicant was prevented from filing the appeal within
the first 60 days due to sufficient cause.
 Investor Protection
Meaning and Concept of Investor Protection
Investor Protection is to protect the investors from being deceived or being put
to loss by the companies.
No doubt, investor protection is the major responsibility of SEBI. SEBI has been
in fact constituted for the purpose of investor protection and welfare only.
According to the preamble of the SEBI Act, the objective of setting up SEBI is to
protect the interest of investors in securities, to promote the development,
and to regulate the security market.
During the last 23 years, SEBI has sought to balance the two objectives by
constantly reviewing and re- appraising its existing policies and programmers,
formulating new policies and regulations, to foster developments in these
areas and implementing them to ensure growth of the market with efficiency,
integrity, and protection of interests of investors.
All throughout, enforcement and surveillance has been a major priority for
SEBI. It introduced several reforms in primary market and acted as a catalyst
for modernization of market infrastructure. It streamlined and simplified the
issue procedure, gave flexibility to the issue process and strengthened the
criteria for accessing the securities market.
In secondary market, it improved market efficiency, integrity, and
transparency. Trading infrastructure was modernized in most of the traditional
stock exchanges, clearing. Settlement systems were improved, and
depositories were established. Mutual funds were reformed drastically so as to
provide greater operational flexibility to the fund manager and increase their
accountability and supervision.
Substantial acquisition and takeover of shares was regulated and regulations
for foreign institutional investors were liberalized. SEBI action has resulted in
number of complaints coming down. SEBI launched prosecution against
companies apart from serving show cause notices, inspections and
investigations.
SEBI Measures to ensure Investor Protection
Following measures have been taken by SEBI to ensure investor protection:

1. Stock Brokers are required to display rights and obligations of investors,

2. Mutual Fund business has been opened to private sector.
3. Depository Participants are required to get their internal audit done.
4. Companies are required to undergo Secretarial audit.
5. PAN has been made mandatory in all capital market transactions.

Investor Grievances and their Redressal

The dictum "caveat emptor" is the maxim from the law of sale of goods, which
means that when buying anything the buyer must protect his own interests
and in case he fails to exercise reasonable care and caution. He cannot
complain later for any loss caused to him due to his failure or negligence.

However in the securities market, the transactions are not carried on the
principle of caveat and the investors are provided due protection. For their
grievance, they can seek redressal from the seller/issuer of securities under the
law.

Various common grievances of investors in India are as follows:

a) In case of any public issue, Interest on delayed refund, Allotment advice,

Share certificates and revalidations in case shares are held in physical
mode.
b) Regarding listed debentures, non-receipt of Interest due, redemption
proceeds, Interest on delayed payment.
c) Grievance relating to shares or debentures in unlisted companies,
d) Grievance relating to Deposits in collective investment schemes like
plantations etc. and Units of Mutual relating and Funds; Fixed Deposits in
Banks and Finance Companies and Manufacturing companies.

In respect of the grievances of investor, complaints can be lodged with the

Registrar of companies, Ministry of Company Affairs, Stock Exchange or SEBl as
the case may be and in certain cases, they can be pursued with the Company
Law Board also to obtain remedies and relief.
Investor Grievance Centers have been set-up in every recognized stock
exchange which takes up all complaints regarding the trades effected in the
exchange and the relevant member of the exchange.
Moreover, two other avenues are always available to the investors to seek
redressal Suits of their companies ie. Companies with Consumers Disputes
Redressal Forum and suits in the Courts.

Investor Education
Investor education forms an important part of SEBI's efforts to protect the
interest of the investors in securities markets. A series of information
brochures and pamphlets have been issued in the past for the benefit of the
investor.

These publications indicate the various risks associated with capital market
investment, the rights of the investors, the responsibilities, and details of the
grievance redressal machinery available to then in respect of various
grievances and the remedy/relief to be obtained from different agencies like
SEBI, Ministry of Company Affairs, Stock Exchanges, Reserve bank of India, and
Registrars to the Issue, apart from seeking relief through Consumer Disputes
Redressal Forum, Company Law Boards and Courts of Law. The
brochures/pamphlets contain tips and clarifications on trading of securities on
the Stock Exchange and ensure proper transfer of securities to the transferee.

On the introduction of the depository system, information has been

disseminated to the investors on the advantages and benefits offered by the
new system, eliminating un and loss and delays in postal delivery.

The investors associations registered with SEBI, the Stock Exchanges bodies
also conduct investor education programmers from time to time to of the
changes in the law and regulations and the methods of protecting malpractices
and delays cropping up in the market. This is further supple and magazines in
the filed of corporate investment as well as newspaper on the newly emerging
problems and pitfalls and the methods to protect them.
Basic Points on Investing in Corporate Securities
In deciding on an investment, one should be guided by

1. Promoter's track record and experience in the chosen field as well as

reputation and integrity:
2. The professional management team appointed to run the company:
3. Objects of the issue and project details;
4. Product technology and assure market;
5. Projected profits and ratios;
6. Risk factors and pending litigations;
7. Whether statutory clearances have been obtained;
8. Record of service by company to shareholders and investors in the past
(by reference to Stock Exchange, Registrars of Companies, and Investors
associations.

Rights of Members as per SEBI's Investor Education Guide

 To receive share certificates on allotment or transfer, as the case may
be, in due time.
 To receive copies of notices for various general meetings and attend
them either personally or through proxies and to participate and vote.
 To receive copies of abridged annual report balance sheet, profit and
loss account and auditor's report.
 To receive dividends declared (including interim dividends) in time.
 To receive other corporate benefits such as rights issues, bonus issues as
and when approved.
 To apply to the Company Law Board to call or direct the calling of annual
general meeting of the company.
 To inspect minute books of the general meetings and to take copies
thereof.
 To proceed against the company by way of civil or criminal proceedings
wherever justified.
 To apply for the winding up of the company.
 To receive the residual proceeds on winding up.
Besides the above rights enjoyed as individual shareholder, the following rights
can also be claimed as a group:

a) To requisition an extraordinary general meeting.

b) To demand a poll on any resolution.
c) To apply to Company Law Board for relief in cases of oppression and
mismanagement.

Responsibilities of Members AS per SEBI's Investor Education Guide

Besides the above rights, members also have certain responsibilities to be
discharged they are:

a) To remain informed.
b) To be vigilant.
c) To participate and vote in general meetings.
d) To exercise rights as an individual and also as a group

Investor Education and Protection Fund

Investor Education and Protection Fund (IEPF) has been established under
Section 125 of the Companies Act, 2013 by the Central Government for
promotion of investors’ awareness and protection of the interests of the
investors.

Investor Education and Protection Fund Rules [EPF Rules] stipulate the
activities related to investors education, awareness and protection for which
the financial sanction can be provided under IEPE.

Following are the activities stipulated under IEPF Rules:

a. Education Programme through Media.

b. Organizing Seminars and Symposia.
c. Proposals for registration of Voluntary Associations or Institution or
other organizations engaged in Investor Education and Protection
activities.
d. Proposals for projects for Investors' Education and Protection including
research activities and proposals for financing such projects.
 e. Coordinating with institutions engaged in Investor Education, awareness
and protection activities.

Ombudsman
Ombudsman, in its literal sense, is an independent person appointed to hear
and act upon citizen's complaints about Government Services.

In this regard, SEBI has issued SEBI (Ombudsman) Regulations, 2003. As per
this, Ombudsman means any person appointed under the aforesaid
regulations and also includes stipendiary ombudsman.

Stipendiary Ombudsman means a person appointed for the purpose of acting

as Ombudsman in respect of a specific matter and for which he may be paid
such expenses, honorarium and sitting fees as may be determined by SEBI
from time to time. A person is eligible to be appointed as Stipendiary
Ombudsman if he –

1. has held a judicial post or an executive office under the Central or State
Government for at least 10 years;
2. is having experience of at least 10 years in matters relating to consumer
or investor protection;
3. has been a legal practitioner in corporate matters for at least 10 years;
or
4. Has served for a minimum period of 10 years in any public financial
institution.

Following are the important powers and functions of Ombudsman:

1. To receive complaints against any intermediary or a listed company;

2. To consider such complaints and facilitate resolution thereof by
amicable settlement;
3. To approve amicable settlement of the dispute between the parties; and
4. To adjudicate such complaints in the event of failure of amicable
settlement.
Financial literacy-cum-counseling centre
RBI has set up financial literacy-cum-counseling Centre for investor education
in few districts on pilot basis to help individuals find realistic solutions to their
problems and solution for repayments that are achievable.

Centre provides financial education and credit counseling Financial Literacy

includes providing familiarity with an understanding of financial market
products their rewards as well as risks, to enable individuals to make informed
choices and to take effective action to improve overall well-being and avoid
distress in financial matters. Credit Counseling includes educating the debtor
about credit, budgeting financial management and imparting negotiating skill
with creditors to work out a repayment plan.

SEBI COMPLAINTS REDRESS SYSTEM [ SCORES ]

SEBI launched a centralized web based complaints redress system 'SCORES in
June 2011. The purpose of SCORES is to provide a platform for aggrieved
investors, whose grievances, pertaining to securities market, remain
unresolved by the concerned listed company or registered intermediary after a
direct approach.
SCORES also provides a platform, overseen by SEBI through which the investors
can approach the concerned listed company or SEBI registered intermediary in
an endeavor towards speedy redressal of grievances of investors in the
securities market.
It would, however, be advisable that investors may initially take up their
grievances for redressal with the concerned listed company or registered
intermediary, who are required to have designated persons/officials for
handling issues relating to compliance and redressal of investor grievances.

salient features of SCORES are:

1. Centralized database of investor complaints;
2. Online movement of complaints to the concerned listed company or
SEBI registered intermediary:
3. Online upload of Action Taken Reports (ATRs) by the concerned listed
company or SEBI registered intermediary; and
 4. Online viewing by investors of actions taken on the complaint and its
current status.

SEBI (INFORMAL GUDANCE) SCHEME, 2003

SEBI has issued SEBI (Informal Guidance) Scheme, 2003 for facilitating the
various kinds of people, by providing informal guidance on the various aspects
related to capital market.

Following persons may make a request for Informal Guidance under the
Scheme:

1. Any intermediary registered with SEBI.

2. Any listed or prospective listed company;
3. Any mutual fund trustee company or asset management company,
4. Any acquirer or prospective acquirer under the SEBI (Substantial
Acquisition of Shares & Takeover) Regulations, 1997.