What Are The Powers And Functions Of SEBI?

Powers And Functions Of SEBI
Powers And Functions Of SEBI

As we all know that the securities market exists in almost every economy where the dealing of financial instruments like bonds, shares, securities, debentures, etc is done and this regulatory body i.e. SEBI governs this market.

Let’s see the constitution of the board, objectives of SEBI along the powers and functions of SEBI.

Before observing the power and functions of SEBI, let’s understand what is SEBI?

SEBI stands for Securities and Exchange Board of India which is a regulatory body. This statutory body was first established in 1988 as per the provisions given under SEBI Act, 1992. The headquarters of SEBI is located in Chennai, Ahmadabad, Kolkata, and New Delhi.

Section 3 of the SEBI Act, 1992 provides for the establishment of the Securities and Exchange Board. The board established under the SEBI Act, 1992 consists of 9 members that are; i) a chairman as the union government nominates, ii) 2 members from the Ministry of Finance, iii) 1 member from RBI, iv) 3 whole-time members as the govt. of India nominates and v) 2 part-time members as the govt of India nominates.

There are almost twenty departments with which SEBI is dealing; some of them are policy analysis, corporate finance, legal affairs, investment management, market regulation, etc.

What Are The Objectives Of SEBI?

There are various objectives which this statutory body i.e. SEBI has to fulfill which are as follows:

  • It aims to protect the interests of the investors who are willing to invest.
  • It aims to provide a safe market for the securities issuer for the purpose of raising funds or capital.
  • Their goal is to encourage the development of the secondary market or the securities market.
  • It aims to formulate better provisions or rules for the better working of the secondary market.
  • It basically aims to prevent the malpractice that has the probability to occur.
  • It also governs the mutual funds.
  • It aims to create a healthy environment for the investors to trade.
  • It aims to cut the roots of insider trading along with keeping a proper check & balance on Insider training.
  • It also aims to keep a check on financial intermediaries like brokers, underwriters, etc.

The Powers & Functions Of SEBI

Section 11(2) of the SEBI Act, 1992, has provided a detailed description of the functions which this regulatory body i.e. has to perform.

All these functions have been categorized into three categories for a better understanding of the readers that are protective function, regulatory functions, and development functions. These functions of SEBI are summarized as follows:

  • The protective functions are observed as it plays the role of watchman for the better interests of investors by prohibiting insider training, keeping an eye on price rigging, by encouraging fair practices, and also provides for education regarding the concepts like finance, money management, etc.
  • The regulatory functions of SEBI are encountered as it provides for the regulations for the financial intermediaries like broker, underwriters etc, it provides guidelines which Corporates are compulsorily required to follow. It also provides strict rules regarding stockbrokers as well as merchant brokers. It can enquire audits of stock exchanges anytime it deems necessary. It also governs the procedure related to taking over a business or company.
  • The development functions of SEBI are encountered as it provides for the training to the financial intermediaries. It also promotes trading by way of electronic means with the help of registered stock brokers. It created the underwriting system as an option for the purpose of reducing the cost of the issue. It has introduced the concepts of DEMAT format and also the concept of discount brokerage.
  • Other functions like; ensuring the efficiency of the securities market by way of keeping the research and introducing various developments. It governs the credit rating agencies along with foreign portfolio investors. It also works as a platform for investment advisors, registrars, bankers, trustees, etc. it keeps a check on unfair trade practices in the securities market and as per the SEBI Act, gives punishment or penalty to the violator.
  • It is also provided in the SEBI Act of 1992 that the board of SEBI may perform any other concerning functions which deems fit or necessary or as prescribed from time to time.

The Powers Of SEBI

  • It is empowered to inspect or enquire the books of financial intermediaries.
  • It has the power to handle the registration of brokers which are the market participants of securities markets.
  • It is empowered to inspect or enquire the books of accounts of stock exchanges as well as it can call for periodical returns if it deems necessary to it.
  • It is empowered to govern or regulate as well as approve the by-laws of the stock exchanges.
  • It is empowered to compel some or specified companies to get listed on one or more stock exchanges as it deems fit.
  • It can summon and enforce the attendance of a person as well as may examine that person on oath if it is required to board.
  • It possesses quasi-judicial authority as it is empowered to pronounce judgments in any case or matters related to fraud or any other malpractice or unethical practice for the purpose of ensuring accountability in the secondary market.
  • It possesses the quasi–executive authority as it has the power to implement the regulations as well the judgments given by the board. It is also empowered to take legal actions against the person who found liable for any violations that occurred.
  • It possesses quasi-legislative authority as it has the power to enact or frame the rules and regulations which deems necessary for the purpose of maintaining fairness and transparency in the working of the securities market.

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SEBI is performing a very crucial role in the proper functioning of the securities markets as we all know that the securities market somewhat works as a barometer that measures the health of an economy and keeps a check on this market.

The parliament has enacted an Act i.e. SEBI Act, 1992 which provides the powers and functions of SEBI in a detailed manner and the prohibitions and punishments for any violations.

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