What Is the Securities And Exchange Board Of India – SEBI?

The Securities and Exchange Board of India (SEBI) is the most important regulatory body of the securities market in the Republic of India.

SEBI is the counterpart of the Securities and Exchange Commission (SEC) in the U.S. Its stated objective is “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.”

Creation of the SEBI

The Securities and Exchange Board of India was established as a non-statutory regulatory body in the year 1988, but it was not given autonomous, statutory powers until January 30, 1992, when the Securities and Exchange Board of India Act was passed by the Parliament of India. SEBI supplanted the Controller of Capital Issues, which hitherto had regulated the securities market in India, as per the Capital Issues (Control) Act of 1947, one of the first acts passed by the Parliament of India following its independence from the British Empire.

The SEBI headquarters is located in the business district at the Bandra Kurla Complex in Mumbai, but the entity also possesses Northern, Eastern, Southern and Western regional branch offices in the cities of New Delhi, Kolkata, Chennai, and Ahmedabad, respectively. It also has small local branch offices in Bangalore, Jaipur, Guwahati, Bhubaneshwar, Patna, Kochi, and Chandigarh.

Key Takeaways

  • The Securities and Exchange Board of India (SEBI) is the leading regulator of the securities market in the Republic of India, analogous to the Securities and Exchange Commission in the U.S.
  • SEBI drafts regulations and statutes in its legislative capacity pass rulings and orders in its judicial capacity and conduct investigations and enforcement actions.
  • Some criticize SEBI for its lack of direct accountability to the public and its rather absolute powers.

Charter of SEBI

According to its charter, it is expected to be responsible for three main groups: the issuers of securities, investors, and market intermediaries. The body has somewhat nebulous powers, as it drafts regulations and statutes in its legislative capacity, passes rulings and orders in its judicial capacity, and conducts investigations and enforcement actions in its executive capacity.

SEBI is run by a board of directors, which consists of the Chairman (as of April 2019, Shri Ajay Tyagi), who is elected by the Parliament of India; two officers from the Union Finance Ministry; one member from the Reserve Bank of India; and five members who are elected by the Parliament, like the Chairman.

Criticism of the SEBI

Many critics object to SEBI as a regulatory body because it is insulated from direct accountability to the public. The only mechanisms to check its power are a Securities Appellate Tribunal, which consists of a panel of three judges, and a direct appeal to the Supreme Court of India.

Fortunately for the people of India, the SEBI has been mostly benevolent in its use of its authority, issuing strong systematic reforms rapidly and aggressively with its unchecked power. In the last decade, India has faced its share of financial and economic crises, both global—like the Great Recession of 2008-09—and local, like the Satyam Fiasco of 2009 (a sort of Indian version of Enron, in which a major company, Satyam Computer Services scandal of 2009, admitted to accounting fraud and manipulation of financial records). In both cases, SEBI was able to quickly take regulatory steps to mitigate the effects of these problems, stabilize the economy and take action to make sure such situations never occurred again.