If you are investing or trading into the financial and capital market, then you may know about the importance of Securities and Exchange Board of India (SEBI). Many people know that SEBI is the regulator for all the security markets in India, but in reality, it plays a key role in the financial markets.
Let us try to learn in brief about the SEBI and its importance.
What is SEBI?
The Securities and Exchange Board of India is a regulator of the securities market in India. It was established by the government of India in the year 1988 to replace the Controller of Capital Issues (CCI), that was previously functioning as a regulatory body before the formation of SEBI. In the initial years of its formation, SEBI was a non-statutory body but the government through the Securities and Exchange Board of India Act, 1992, provided statutory power to the SEBI.
One of the key objectives of the SEBI is to ensure that a market is a safe place for investment. For instance, if you are planning to roll out a new mutual fund investment plan, then first you will be required to take a prior permission from the SEBI before the launch. It will first ensure that the plan you are going to launch adhere to the desired SEBI guidelines, rules and regulations or not. If the plan follows all the rules, then only your plan will get a legal sanction in the financial market of India.
Importance of SEBI
There are lots of important functions that SEBI has to perform to ensure that the market is operating smoothly. The importance of SEBI are as follows:
One of the main importance of SEBI is to guide and safeguard the rights and interests of the investors.
Competitive and Professional
SEBI formulates a code of conduct to ensure the brokers, merchant bankers, etc remain competitive and professional, do not cheat the people by adopting trading malpractices.
Proper Functioning of the Stock Exchange
There are certain rules and regulations laid down by the SEBI that ensures the smooth or proper functioning of the stock exchange and securities industry.
Keeping a check on the Working of Mutual Funds
It keeps a close tab on the working of the mutual funds to safeguard the investors from the unfair trade practices.
Educating the Investors
From time-to-time, SEBI comes up with the campaigns to educate the investors.
Checking the Insider trading
It keeps a check on the insider trading to protect the interests of the general investors. It is an illegal trading practice undertaken by the fraud brokers or other agents.
Monitoring Takeovers and Acquisitions
In order to protect the interest of the investors, SEBI comes up with the guidelines to ensure that the takeover and acquisitions of the companies are carried out in a systematic manner.
It carries out an audit of the stock exchanges and other intermediaries to ensure they function smoothly.
The role of the SEBI in maintaining the efficiency and transparency of the stock exchanges and economy cannot be ignored. It also comes with certain regulations or guidelines according to the need of the market and protecting interests of the investors. As long as SEBI performs its duty as a financial market watchdog, it can be ensured that the market and economy will remain free from scams and frauds.