What Is the Securities and Exchange Board of India (SEBI)?

The Securities and Exchange Board of India (SEBI) is the most important regulator of securities markets in 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.”

Key Takeaways

  • The Securities and Exchange Board of India (SEBI) is the leading regulator securities markets in India, analogous to the Securities and Exchange Commission in the U.S.
  • SEBI has wide-ranging regulatory, investigative, and enforcement powers, including the ability to impose fines on violators.
  • Some criticize SEBI for that they say is a lack of transparency and direct accountability to the public for an institution with such enormous powers.

Creation of the SEBI

The Securities and Exchange Board of India was established in its current incarnation in April 1992, following the passage of the Securities and Exchange Board of India Act by the nation's parliament. It was first established with more limited powers in 1988. It supplanted the Controller of Capital Issues, which had regulated the securities markets under the Capital Issues (Control) Act of 1947, passed just months before India gained independence from the British.

The SEBI headquarters is located in the business district at the Bandra-Kurla Complex in Mumbai. It also has regional offices in the cities of New Delhi, Kolkata, Chennai, and Ahmedabad, and more than a dozen local offices in cities including Bangalore, Jaipur, Guwahati, Patna, Kochi, and Chandigarh.

SEBI's Charter

According to its charter, SEBI is expected to be responsible for three main groups:

  • The issuers of securities
  • Investors
  • Market intermediaries

The body drafts regulations and statutes in a regulatory capacity, passes rulings and orders in a judicial capacity, and conducts investigations and imposes penalties in an enforcement capacity.

SEBI is run by a board of directors, including a chairman who is elected by the parliament, two officers from the Ministry of Finance, one member from the Reserve Bank of India, and five members who are also elected by the parliament.

Criticism of SEBI

Critics say SEBI lacks transparency and is insulated from direct public accountability. The only mechanisms to check its power are a Securities Appellate Tribunal, which consists of a panel of three judges, and the Supreme Court of India. Both bodies have occasionally censured SEBI.

Still, SEBI has been aggressive at times in doling out punishment and in issuing strong reforms. The regulator received praise for its actions following the Satyam fraud scandal when it hit PwC with a two-year ban. It also established the Financial Stability Board in 2009, in response to the global financial crisis, giving the board a broader mandate than its predecessor to promote financial stability.