SEBI plays a central role in India’s financial system. Known as the Securities and Exchange Board of India, this regulator ensures that the stock market runs smoothly, fairly, and without fraud. If you’re preparing for CLAT or simply trying to understand Indian financial law better, knowing what SEBI does is essential.
What Is SEBI and Why Was It Formed?
SEBI was set up in 1988 and got statutory powers in 1992. Lawmakers created it to protect investor interests and promote transparency in the securities market. Before SEBI, investors had little protection against market manipulation and insider trading. By giving it regulatory authority, the government aimed to restore trust and discipline in the financial system.
Key Functions
SEBI performs three major functions: it regulates, develops, and protects. It creates rules for companies, brokers, and investors to follow. It also promotes good practices among market players. When someone breaks the rules, the board takes action. These include fines, investigations, and banning fraudsters from market activities.
How SEBI protects Investors?
SEBI works to keep investors informed and safe. It mandates companies to disclose all material information. It also monitors market activity to detect suspicious movements. By ensuring fair play, it prevents insider trading, pump-and-dump schemes, and misleading advertisements. This protection builds confidence among both small and large investors.
SEBI’s Role in Regulating IPOs and Mutual Funds
Whenever a company wants to issue shares through an IPO, it must follow the board’s guidelines. The board reviews the draft red herring prospectus to make sure all details are clear and truthful. Mutual funds also fall under SEBI’s watch. The regulator checks if fund managers disclose risks properly and invest in line with investor objectives.
Recent Actions and Initiatives
SEBI has introduced reforms like T+1 settlement to speed up transactions. It has also tightened rules around corporate governance and related-party transactions. These steps make the Indian capital market more efficient and investor-friendly.
Conclusion
The board ensures that India’s financial markets run on trust, fairness, and accountability. It regulates companies, protects investors, and enforces transparency.
