1. What is SEBI

The Securities and Exchange Board of India (SEBI) is a body under the government of India that regulates the securities market. It was established in the year 1988 and received statutory powers under the SEBI Act, 1992.   SEBI is headquartered in Mumbai, India and has regional offices in major cities of India such as New Delhi, Kolkata, Chennai and Ahmedabad. 

2. Structure of SEBI

SEBI’s hierarchal organisation structure consists of nine members; a chairman nominated by the Union Government of India, two members who are officers from the Union Finance Ministry, one member from the Reserve Bank of India and five other members who are also nominated by the Union Government of India.

3. Functions of SEBI

The Preamble of the Securities and Exchange Board of India describes the basic functions of SEBI is the protection of investors interests in securities and to be a platform to promote, develop and regulate the securities market in India as well as the relating matters that are connected with it.

The securities exchange board is permitted to approve rules and laws pertaining to the stock exchanges. It also implies that SEBI should enforce the laws for stock exchanges to follow. SEBI examines books of accounts of financial mediators and recognized stock exchanges. Another role of SEBI is to urge respective companies to list their shares in stock exchanges and manage the registration of distributors/brokers.

4. Authority and Power of SEBI

The SEBI board has three main powers:

  • Quasi-judicial
  • Quasi-legislative
  • Quasi-executive

SEBI, under its legislative capacity, has the right to draft resolutions, conduct investigations and enforce action. Its executive function allows it to pass rules and orders under its judicial capacity. Despite the powers, the results of SEBI’s functions still have to go through the Securities Appellate Tribunal and the Supreme Court of India.

5. Mutual Fund Regulations by SEBI

Some of the regulations for mutual funds laid down by SEBI are:

(1) A sponsor of a mutual fund, an associate or a group company which includes the asset management company of a fund, through the schemes of the mutual fund in any form cannot hold:
(a) 10% or more of the shareholding and voting rights in the asset management company or any other mutual fund
(b) An asset management company cannot have a representation on a board of any other mutual fund
(2) A shareholder cannot hold 10% or more of the shareholding directly or indirectly in the asset management company of a mutual fund

6. SEBI Notifications

7. Mutual Funds and SEBI

According to SEBI guidelines, mutual funds must register as trusts under the Trusts Act, 1882. Then a firm must be set up as a separate asset management company (AMC) to run a mutual fund. The net worth of the parent firm or AMC must be Rs. 50,000,000. Mutual funds must also register with the SEBI. There also exists a self-regulation agency for mutual funds, Association of Mutual Funds of India (AMFI).  

The Association of Mutual Funds in India (AMFI) is focused on developing the Indian Mutual Fund Industry with professional and ethical qualities. AMFI  aims to enhance the standards in all areas with a view to protect and promote mutual funds and the stakeholders.

As of now, all the 43 Asset Management Companies that are registered with SEBI, are members of AMFI.

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