Stock Exchanges in India were continued to be regulated directly by the Government of India under powers conferred in terms of the Securities Contract (Regulations) Act 1956 up to the late Eighties. In the year 1988 the Government of India constituted the Securities and Exchange Board of India (Popularly referred as 'SEBI') with Head office at Mumbai through an executive resolution to act as the independent regulator of Stock exchanges, the primary market, Mutual Funds etc. The Capital Issues (Control) Act of 1947 was abolished in May 1992. The abolition of CCI (Controller of Capital Issues) and allowing free pricing of issues prompted many companies to raise funds from the equity market at a premium. The ground was cleared for the incoming of a market regulatory authority replacing direct government control. SEBI was made into a statutory corporate body in the year 1992 with the passing of the Securities and Exchange Board of India Act in 30th January 1992. The objects clause of the Act explained the scope and purpose of the Act in the following words:

An Act to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto.

Subsequently on 13th September 1994, the Government of India through a Gazette Notification delegated the Powers conferred to it under the Securities Contracts (Regulation) Act 1956 to SEBI. The Government in the year 1996 also passed the Depositories Act 1996, which came into retrospective operation from 20 September 1995. SEBI is made the Regulator for monitoring the due compliance and enforcing the provisions of this Act also

1. The Board i.e. SEBI shall consist of the following members, namely:-

   1. a Chairman;

   2. two members from amongst the officials of the Ministries of the Central Government dealing with Finance and Law;

   3. one member from amongst the officials of the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934;

   4. two other members, to be appointed by the Central Government.

2. The general superintendence, direction and management of the affairs of the Board shall vest in a Board of members, which may exercise all powers and do all acts and things which may be exercised or done by the Board.

3. Save as otherwise determined by regulations, the Chairman shall also have powers of general superintendence and direction of the affairs of the Board and may also exercise all powers and do all acts and things which may be exercised or done by the Board.

4. The Chairman and members referred to in clauses (a) and (d) of sub-section (1) shall be appointed by the Central Government and the members referred to in clauses (b) and (c) of that sub-section shall be nominated by the Central Government and the Reserve Bank of India respectively.

5. The Chairman and the other members referred to in clauses (a) and (d) of sub-section (1) shall be from amongst the persons of ability, integrity and standing who have shown capacity in dealing with problems relating to securities market or have special knowledge or experience of law, finance, economics, accountancy, administration or in any other discipline which, in the opinion of the Central Government, shall be useful to the Board.

These are detailed in the second chapter of the Act under Section 11(1). The section points out that it shall be duty of the Board to protect the interests of the investors in securities and to promote and development of, and to regulate the securities market by such measures as it thinks fit. In brief the statutory objectives of the SEBI enshrined in the SEBI Act are fourfold-

1. Protection of investors interests in securities

2. Promotion of the development of the securities market

3. Regulation of the securities market and

4. Matters connected therewith and incidental thereto.

By way of amplification of the above core objectives, the Act enumerates as under the different powers & functions of SEBI in greater details as under:-

1. regulating the business in stock exchanges and any other securities markets;

2. registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner.

   (ba) registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf.

3. registering and regulating the working of venture capital funds and collective investment schemes including mutual funds;

4. promoting and regulating self-regulatory organisations;

5. prohibiting fraudulent and unfair trade practices relating to securities markets;

6. promoting investors' education and training of intermediaries of securities markets;

7. prohibiting insider trading in securities;

8. regulating substantial acquisition of shares and take-over of companies;

9. calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds and other persons associated with the securities market and intermediaries and self- regulatory organisations in the securities market;

10. performing such functions and exercising such powers under the provisions of Securities Contracts (Regulation) Act, 1956, as may be delegated to it by the Central Government;

11. levying fees or other charges for carrying out the purpose of this section;

12. conducting research for the above purposes;

    (la) calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;

13. performing such other functions as may be prescribed.

For the due exercise of its responsibilities under the Act, the Board is vested with the same powers as are vested in a civil court, in respect of the following matters, namely:-

1. the discovery and production of books of account and other documents, at such place and such time as may be specified by the Board;

2. summoning and enforcing the attendance of persons and examining them on oath;

3. inspection of any books, registers and other documents of any person referred to in section 12, at any place.

The Board may, for the protection of investors, specify, by regulations,-

1. the matters relating to issue of capital, transfer of securities and other matters incidental thereto; and

2. the manner in which such matters, shall be disclosed by the companies.

SEBI is empowered to issue Directions to the following intermediaries with regards to matters connection with Section 12:

• stock-broker, sub- broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market

• Depository, depository participant, custodian of securities, foreign institutional investor, credit rating agency or any other intermediary associated with the securities market

• sponsers of venture capital funds, or collective investment schemes including mutual funds

• and to any Company with regards to matters to be disclosed by the Companies as specified in Section 11(A)

Different intermediaries mentioned above can commence functioning in their respective activities only after registration with SEBI and complying with requirements as stated under specific regulations intended for each.

(1) No stock-broker, sub- broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act.

(1A) No depository, participant, custodian of securities, foreign institutional investor, credit rating agency or any other intermediary associated with the securities market as the Board may by notification in this behalf specify, shall buy or sell or deal in securities except under and in accordance with the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act.

(1B) No person shall sponsor or cause to be sponsored or carry on or cause to be carried on any venture capital funds or collective investment schemes including mutual funds, unless he obtains a certificate of registration from the Board in accordance with the regulations.

SEBI has issued detailed Rules and Regulations to be adhered to by each of the intermediaries above specified

The Central Government shall by notification, establish one or more Appellate Tribunals to be known as the Securities Appellate Tribunal to function as Appellate Authority and hear appeals

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or a Securities Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. However appeals against the decision of Securities Appellate Tribunal can be preferred before a High Court.

SEBI since its inception has carried out its functions effectively and brought about immense changes in the environment of the investment market to the benefit of the common investor. These details are discussed in the next page.