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An In-Depth Exploration of the Powers and Functions of SEBI

The Securities and Exchange Board of India (SEBI), established by the Government of India in 1988, is the chief regulator of the securities market in India. It is invested with a comprehensive set of powers to execute its functions as laid down by the SEBI Act of 1992.

Key Legislative Provisions for SEBI's Functions and Powers

The primary functions and powers of SEBI are embedded in Section 11 of the SEBI Act, 1992. This statute provides the basic framework that guides SEBI's operations and outlines its key responsibilities.

Principal Functions of SEBI

  1. Investor Protection: SEBI's first and foremost function is to protect the interests of investors in securities. It achieves this through several measures including the enforcement of disclosure norms, conducting investor awareness programs, and taking prompt corrective actions in case of misconduct.

  2. Regulation and Development of the Securities Market: SEBI is tasked with the duty of regulating the business in the stock exchanges and other securities markets. It fosters the development and orderly conduct of these markets, ensuring fair practices and smooth operations.

  3. Regulating Intermediaries: SEBI regulates and supervises the functioning of various intermediaries such as brokers, underwriters, and merchant bankers involved in the securities market. It issues guidelines, imposes sanctions and can even ban these entities from operating in the market in case of non-compliance.

  4. Promotion of Fair Practices: SEBI aims to promote transparency and fair practices by prohibiting insider trading and fraudulent manipulative practices in the securities market.

Enforcement Powers of SEBI

To execute these functions, SEBI has been conferred with robust enforcement powers by the SEBI Act.

  1. Regulatory Powers: SEBI can formulate regulations, guidelines, and code of conduct for entities operating in the securities market, as seen with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, and the Prohibition of Insider Trading Regulations, 2015.

  2. Investigative Powers: Under Section 11C of the SEBI Act, the regulator has the power to investigate potential violations of securities laws, including the right to call for information from any individual or company.

  3. Quasi-Judicial Powers: SEBI holds the authority to conduct hearings and pass rulings in matters concerning the securities market. It can issue various orders, such as cease-and-desist orders, disgorgement orders, or penalty orders.

  4. Power to Grant Registration: SEBI has the power to grant registration to market intermediaries and also to suspend or cancel such registrations in cases of defaults.

Illustrative Case Laws

  1. Sahara India Real Estate Corporation Ltd and Others vs SEBI: This landmark case is a testament to SEBI's enforcement powers, where it restrained the entities from accessing the securities market due to their failure to comply with public issue norms.

  2. Roopalben Panchal & Others vs SEBI: This case highlighted SEBI's power to investigate insider trading. SEBI could establish that sensitive information was shared among insiders to manipulate the market, leading to punitive measures.

Conclusion: Powers and Functions of SEBI

In essence, the Securities and Exchange Board of India (SEBI), as the sentinel of the Indian securities market, is bestowed with a wide range of functions and powers. These, coupled with SEBI's stringent enforcement mechanisms, ensure the protection of investor interests, promote fair trade practices, and guarantee the smooth functioning and development of the securities market. The decisive role of SEBI in maintaining the integrity of the securities market reaffirms its status as a robust and comprehensive regulator.

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