Quick Summary
SEBI regulates the securities market and protects investors. For board exams, learn its role under three headings: protective, developmental, and regulatory functions.
Meaning and Need
The securities market needs rules because investors can be harmed by false information, price manipulation, insider trading, or unfair practices. SEBI works to keep the market orderly, transparent, and trustworthy.
Main Objectives
1. Protect the interests of investors 2. Promote the development of the securities market 3. Regulate the securities market and its intermediaries
Functions of SEBI
Protective Functions
- Prevents insider trading
- Checks fraudulent and unfair trade practices
- Protects investors from misleading information
- Promotes investor awareness
Developmental Functions
- Encourages fair market practices
- Trains intermediaries
- Promotes investor education
- Supports innovation and orderly growth in the market
Regulatory Functions
- Registers and supervises brokers and other intermediaries
- Regulates stock exchanges and mutual funds
- Frames rules for issue and transfer of securities
- Conducts inspections and inquiries where required
Powers of SEBI
- Call for information from market participants
- Inspect books and records
- Issue directions
- Regulate intermediaries
- Take action against violations
Why SEBI Matters to Students of Commerce
Without regulation, investors may lose confidence in the capital market. When trust falls, savings do not flow smoothly into business investment. SEBI therefore supports both investor protection and capital formation.
Important Questions
One Mark
1. Expand SEBI. 2. Name one protective function of SEBI. 3. Which body regulates the securities market in India?
Short Answer
1. State the objectives of SEBI. 2. Write any three protective functions of SEBI. 3. Distinguish between protective and regulatory functions.
Long Answer
1. Explain the functions of SEBI. 2. Describe the role of SEBI in investor protection. 3. Explain why regulation is necessary in the securities market.
Common Mistakes
- Writing only “protects investors” without explaining how.
- Mixing up SEBI with RBI.
- Listing powers when the question asks for functions.
- Forgetting the three-function classification.
Revision Checklist
- [ ] Full form and meaning of SEBI
- [ ] Three objectives
- [ ] Protective, developmental, regulatory functions
- [ ] Powers of SEBI
- [ ] Difference between SEBI and RBI