Provision

The SEBI, or Securities and Exchange Board of India is the regulatory body handling the securities and commodity market in India. It functions under the Ministry of Finance.

Origin of SEBI

• Previous Authority: Before SEBI, the Controller of Capital Issues was the regulatory authority, which derived authority from the Capital Issues (Control) Act, 1947.
• Setting Up: The Securities and Exchange Board of India as an institution was set up in 1988 as a non-statutory body for regulating the securities market. In 1992, it was accorded statutory powers with the passing of the SEBI Act 1992 by the Indian Parliament.

SEBI: Its Organizational Structure

• Structure 
  • The chairman (nominated by the Union Government of India);
  • Two members (Officers from the Union Finance Ministry);
  • One member from the Reserve Bank of India;
  • Five members (Nominated by the Union Government of India). At Least three shall be whole-time members.
• Location: The headquarters of SEBI is located in Mumbai. The regional offices of the Securities and Exchange Board of India are in Ahmedabad, Kolkata, Chennai, and Delhi.

Powers of SEBI

• Quasi-legislative Powers: The Securities and Exchange Board of India has been entrusted with the power to formulate pertinent rules and regulations that include obligations, insider trading regulations, and essential disclosure requirements.
• Quasi-executive Powers: The Securities and Exchange Board of India can use its powers to examine the Book of Accounts and other vital documents to identify and gather evidence against malpractices. 
• Quasi-judicial Powers: If fraud and unethical practices are identified in the securities market, SEBI India can pass judgments.
• Security Exchange By-laws: The Securities and Exchange Board of India has the power to approve by−laws of Securities exchanges for their efficient functioning.

Functions of SEBI

• Protect Interests of Investors: SEBI aims to protect investors’ interests in securities and promote the development of the securities market.
  • The Securities and Exchange Board of India can also mandate securities exchanges to amend their by−laws.
• Accounts of Exchanges: It can inspect the books of accounts and call for periodical returns from recognized securities exchanges.
  • It can also use its powers to inspect books of accounts of financial intermediaries.
• Listing on Security Exchanges: It can also ask certain companies to list their shares in one or more Securities exchanges.
• Registering Brokers: It can ask brokers and sub-brokers for registration.
• Control Malpractice: It can take steps to control malpractice in the securities market by bringing in new laws and technologies.
• Educate Investors: It also performs one of the critical functions namely educating investors about the workings of the security market.
• Platform for Participants: SEBI acts as a common platform for portfolio managers, bankers, stockbrokers, investment advisers, merchant bankers, registrars, share transfer agents, and others.

Significance of SEBI

• Faster Trade Settlement: It has introduced many technical features that have enabled faster settling of trade. This includes the T+2 settlement cycle introduced in 2023.
• Digital Certificates: It has eliminated physical certificates prone to postal delays, theft, and forgery. This stopped making the settlement process slow and cumbersome.
• Investigative Powers: It has powers to seize data, including call data records, from any persons or entities concerning any securities transaction being investigated by it. This ensures transparency in the functioning of exchanges.
• Prevent Fraud: It promotes self-regulatory organizations and prohibits fraudulent and unfair trade practices.

Criticism of SEBI

• Appointment Procedure: It has been alleged that the structure of search-cum-selection committee for recommending the name of the chairman and every whole-time member of SEBI has been altered.
• Influence of the Finance Ministry: In many cases, it was believed that SEBI was directed to act in a particular way while handling cases related to certain business groups.
• Excess Powers: SEBI has some excess powers that allow it to impose serious restraints on economic activity. The entity bears the loss under suspicion.
• Tackling Insider Trading: Rules and regulations regarding the enforcement of insider trading are inadequate.

Way Forward: Improving SEBI

• Regular Review: SEBI has to carry out regular reviews of its activities to perform its job satisfactorily.
• Attract Best Talent: SEBI must not turn into another bureaucratic institution by limiting itself to officials. Lateral entry can be encouraged to attract the best talent from the private sector.
• New Technologies: Upcoming technologies such as Big Data, Machine Learning, Artificial Intelligence, etc can be adopted for better performance.

Securities Appellate Tribunal

• About: The Securities Appellate Tribunal is a statutory body created under the provisions of section 15K of the Securities and Exchange Board of India (SEBI) Act, 1992. 
• Mandate: The Securities Appellate Tribunal is a body that hears appeals and resolves issues based on the orders passed by the SEBI.
  • It has jurisdiction to hear appeals on cases concerning the whole of India.
• Powers of hearing Appeals: It hears appeals against the following:
  • Orders of the Insurance Regulatory and Development Authority of India (IRDAI) in relation to cases filed before it;
  • Orders of Pension Fund Regulatory and Development Authority (PFRDA) in relation to cases filed before it;
  • Orders passed by the Securities and Exchange Board of India.
• Members of Tribunal: The tribunal consists of Presiding officers, judicial members, and technical members.
• Appointment: The members of the tribunal are appointed based on the recommendations of a committee headed by the Prime Minister of India.
• Eligibility: 
  • They must not be adjudged as insolvent;
  • They must not have been convicted of an offense involving moral turpitude;
  • They must not be physically or mentally incapable;
  • They must not possess any financial or other interest that affects their position as Presiding officer or member;
  • They must not abuse their position in a way that is prejudicial to public interest;