How does SEBI Play an Important Role in our Economy?

by Ankit Jaiswal on Basic Finance, Investing Basics
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You may know about the role of Securities and Exchange Board of India (SEBI) if you are into Financial and Capital Market for about sometime?

Most of us know that SEBI is just a regulatory body but in reality, it plays a much wider role in our Financial Market.

Let’s understand in brief what is SEBI and what important role does it play in our economy?

What is SEBI?

Securities and Exchange Board of India (SEBI) is an apex body, which maintains and regulates our Capital Market. It was established in the year 1988 by the Indian government. Later in the year 1992, it received the statutory powers and the status of the fully autonomous body.

Also Read: Indian Capital Market Regulators – Role and functions

It has framed a set of regulations, bye-laws and surveillance systems so as to provide the end users with safety and transparency while dealing in securities. It has introduced many regulatory measures and code of conduct for various intermediaries which include Portfolio Managers, Brokers and Sub-Brokers, Underwriters, Merchant Bankers and so on.

Role of SEBI

Role of SEBI:

1. Restricts Illegal Practices

It forbids illegal and fraudulent practices of the firm which operate in the securities market.

2. Safeguard Investor’s Interest

It protects an investor’s interest in the Capital Market through guidance and proper education. So if you have any complaint about anything related to Capital Market, you can simply visit sebi.gov.in to register your complaint, in the manner shown below:sebi website

3. Regulate working of Exchanges

It regulates and keeps a check on the working of Stock Exchanges and other aspects of the Securities Market.

4. Monitor the workings of Mutual Funds

It monitors and regulates the working of Mutual Funds. It keeps a tight supervision on their business operations and protects investors from any unfair practices.

5. Monitor the functioning of Intermediaries

Keeps a tight check on the functioning of the intermediaries like Merchant Bankers, StockBrokers and other intermediaries present in the Capital Market.

6. Regulate Takeovers and Acquisitions

They issue guidelines to regulate Takeovers, Mergers, and Acquisitions of firms to protect investor’s interest.

7. Prohibition of Insider Activity

It prohibits insider activity and also restricts the undesirable practice of brokers and other agents in the Capital Market.

8. Conducting Audit

It conducts an audit, inspection and other suitable measures to keep a check on the workings of Stock Exchanges and other Intermediaries.
SEBI has played a really important role in regulating the capital markets and in the development of our overall economy.If you see the market value of NSE-listed companies combined together, it stands at Rs 92,09,386 crore as on January 2016 as compared to Rs 3,63,350 crore as on 1994-1995(as shown in the chart below)

Market-capitalisation-of-Nifty

Now, let’s see how SEBI has played an active role in keeping a tight check on the scams and scandals in our economy.

There was a gradual increase in the number of scams held in our country since 1990’s and it was a common phenomenon every year in those days. However, the number of scams has also come down gradually in the last few years

Here’s a quick overview of the number of major scams held in our country-

list scams in India

SEBI has till date played a significant role in maintaining efficiency and transparency in the economy and has also introduced various products fulfilling the need of market participants.

Let’s hope that SEBI will keep playing the role in this manner to improve the workings of our capital market and make our economy free from any scams and frauds.

Learn more about Capital Markets in NSE Academy Certified Foundation of Capital Markets online course on Elearnmarkets.

Keep learning!!


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