Securities And Exchange Board Of India (SEBI): Origin, Structure, Powers, Functions, Significance

SEBI stands for Securities and Exchange Board of India. It is a statutory body functioning under the Ministry of Finance, Government of India. It was established on April 12, 1992, following the SEBI Act, 1992. It is an important topic for the UPSC Exam, included under General Studies Paper III.

What is Securities and Exchange Board of India?

Securities and Exchange Board of India (SEBI) is an autonomous body working under the supervision of the Ministry of Finance. The basic function of SEBI is to protect the interests of investors and to promote and regulate the securities market.

Securities and Exchange Board of India

The SEBI Board is chaired by a Chairman and several other full-time and part-time members. It can also appoint various committees as and when required to look into the prevailing issues of the time.

SEBI Full Form

The full form of SEBI stands for Securities and Exchange Board of India. It is an autonomous body conferred with statutory powers to regulate the securities market in India.

Origin of SEBI

SEBI was first established in the year 1988 as a non-statutory body. But later on, it was conferred with the statutory powers in 1992. The origin of SEBI can be traced as follows:

Before the existence of SEBI, the regulatory authority was vested with the Controller and Capital Issues, which derived its powers from the Capital Issues (Control) Act, 1947.
SEBI was first constituted as the regulator of capital markets in India in April 1988, under the resolution of the Government of India.
Initially, SEBI was a non-statutory body, but in 1992, it became an autonomous body with statutory powers under the SEBI Act.
SEBI is headquartered in Mumbai with regional offices located in Kolkata, Delhi, Ahmedabad, and Chennai.

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SEBI Act, 1992

The SEBI Act, 1992, established the Securities and Exchange Board of India as the regulatory body for the securities market. The Act was enacted to protect the interests of the investors, promote and regulate the development of the securities market.

SEBI possesses the authority to make laws, regulations, conduct investigations, and impose penalties to ensure fair practices and maintain the integrity of the market.

SEBI Organizational Structure

SEBI is an autonomous organization working under the administration of the Ministry of Finance. It is chaired and managed by the following members:

Chairman, nominated by the Government of India
Two Members (Officers from the Ministry of Finance)
One Member from the RBI
Five other members nominated by the Government of India, three of whom should be full-time members.

Tuhin Kanta Pandey is the current chairman of SEBI, who took charge on March 1, 2025. He replaced Madabhi Puri Buch, whose term ended on February 28, 2025.

Powers of SEBI

SEBI, as an autonomous body possessing statutory powers, has several powers over the securities market in India. Some of them include:

Quasi-Legislative Powers: SEBI is presented with the powers to formulate rules and regulations, including obligations, insider trading regulations, and other important disclosure requirements.
Quasi-Executive Powers: SEBI can utilize its powers to examine the Book of Accounts and other important documents to identify and collect information related to malpractices.
Quasi-Judicial Powers: SEBI also has the power to pass judgments if and when any kind of fraud and unethical practices are identified in the securities market.
Bylaws of Securities Exchange: To ensure the efficient and smooth running of the securities exchange, SEBI can also approve relevant bylaws.

Functions of SEBI

Apart from powers, SEBI has several important functions in the securities and exchange market of India.

Primarily, it fulfils the requirement of the three categories:
1. Issuers – Providing a marketplace where the issuers can increase their financing.
2. Investors – Ensuring the safety and supply of precise and accurate information.
3. Intermediaries – Enabling a competitive and professional market for intermediaries.
SEBI, now also has the power to regulate any money pooling scheme worth INR 100 cr. or more, and attach assets in cases of non-compliance after the Securities Laws (Amendment) Act, 2014.
SEBI also performs the functions of registration and regulation of the working of the venture capital funds and collective investment schemes, including mutual funds.
It also works towards the promotion and regulation of self-regulatory organizations and prohibits fraudulent and unfair trade practices.

Objectives of SEBI

The Securities and Exchange Board of India (SEBI) has the following objectives as an autonomous body:

Protection of Investors: Protecting the interests of investors by providing guidance and ensuring that the investment is made safely.
Preventing Fraudulent Practices: Preventing any such malpractices related to trading and the regulation of activities of the Stock Exchange.
Code of Conduct: Developing a code of conduct for financial intermediaries like underwriters, bookers, etc.
Maintaining a balance: Overseeing that a balance between statutory and self-regulations is maintained.

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Significance of SEBI

Being an autonomous body with statutory powers, SEBI holds a position of great significance in the securities market of India. Some of them include:

Faster Trade Settlements: Several technical features have been introduced by SEBI to enable faster settling of trades. One such feature, the T+2 settlement, was introduced in 2023.
Digital Certificates: The SEBI has worked towards eliminating physical certificates, which are prone to general postal delays, theft, and forgery. Such an initiative stopped making the regulation process slow and confusing.
Investigative Powers: SEBI holds the power to seize data, including call records, from any individual or entity that is concerned with securities transactions under the investigation of SEBI. This ensures transparency in the functioning of exchanges.
Prevention of Fraud: It prohibits fraudulent and unfair trade practices and promotes self-regulatory organizations.

Criticism of SEBI

Although the Securities and Exchange Board of India (SEBI) holds a lot of significance in the securities exchange market, it has also been criticized on a lot of grounds. Some of them include:

Process of Appointment: There have been several allegations that the selection procedure for recommending the Chairman of SEBI and other full-time members lacks clarity.
Influence of the Ministry of Finance: SEBI, as has been reported many times, works under the influence and directions of the Ministry of Finance, which favors certain business groups in certain cases.
Excess Powers: SEBI has been endowed with such powers that allow it to impose serious restrictions on the economic activity of the securities market.
Insider Trading: Despite several attempts and initiatives taken by SEBI, insider trading still prevails in the market, and thus, the rules and regulations made against it remain ineffective.

Securities Appellate Tribunal (SAT)

Securities Appellate Tribunal or SAT is a statutory body that was established under the SEBI Act, 1992.

It is set up to hear and dispose of the appeals against orders passed by the Securities and Exchange Board of India, or by an adjudicating officer under the SEBI Act to exercise jurisdiction, powers, and authorities given to the Tribunal by or under this Act or any other law for the time being in force.
SAT hears and disposes of appeals against the orders passed by PFRDA, consequent to the government notification dated May 27, 2014.
SAT also hears and disposes of appeals against orders passed by IRDAI, in terms of the government notification dated March 23, 2015.

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Securities and Exchange Board of India FAQs

SEBI stands for Securities and Exchange Board of India. It is a statutory body working under the Ministry of Finance.

SEBI was constituted as a non-statutory body in April 1988 by a resolution of the Government of India.

Tuhin Kanta Pandey is the current chairman of SEBI, who took charge on March 1, 2025.

The primary function of SEBI is to protect the interests of investors and to promote and regulate the securities market.

The SEBI includes the following members: Chairman, Two Members of the Ministry of Finance, One Member of the RBI, and five other members nominated by the GoI.

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Securities and Exchange Board of India (SEBI): Origin, Structure, Powers, Functions, Significance