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SEBI plays an important role of regulating all the players operating in the Indian capital markets. It attempts to protect the interest of investors and aims at developing the capital markets by enforcing various rules and regulations.

This article on SEBI covers the following:

  1. What is SEBI
  2. Structure of SEBI
  3. Functions of SEBI
  4. Authority and Power of SEBI
  5. Mutual Fund Regulations by SEBI
  6. SEBI Notifications
  7. Mutual Funds and SEBI

1. What is SEBI

Securities and Exchange Board of India (SEBI) is a regulatory body of the Government of India. It controls the securities market. It was established on April 12, 1992 under the SEBI Act, 1992. It is headquartered at the Bandra Kurla Complex in Mumbai, India. It has regional offices in major cities of India such as New Delhi, Kolkata, Chennai and Ahmedabad. These cover the North, South, East and West regions of India. Besides, it has a network of local branch offices in prominent Indian cities.

2. Structure of SEBI

SEBI has a corporate framework comprising of various departments each managed by a department head. Some of the departments are foreign portfolio investors, communications, human resources, collective investment schemes, commodity and derivative market regulation, legal affairs department, etc.

SEBI’s hierarchical 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

– 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- In this, SEBI can deliver judgments related to the securities market pertaining to fraud and other unethical practices. This helps to ensure fairness, transparency, and accountability in the securities market.
  • Quasi-legislative- These powers allow SEBI to frame rules and regulations to protect interests if the investors. Some of its regulations consists of Insider Trading Regulations, Listing Obligation, and Disclosure Requirements etc. These have been formulated to keep malpractices at bay.
  • Quasi-executive- SEBI is empowered to implement its regulations and to put up a case against violators. It is also authorized to inspect books of accounts and other documents if it comes across any violation of the regulations.

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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