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October 29, 2013

Role of SEBI in Regulating Capital Market


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Friends, in our last post we have discussed about the basic details about the Securities and Exchange Board of India (SEBI) along with its objectives and functions.  In this post we shall discuss about Role of SEBI in Regulating Capital Market.
SEBI has played a significant role in regulating capital markets since its inception. It was mainly set up with two main objectives. those are  
  1. developing the capital markets
  2. protecting the investors' interests
To fulfill these objectives, it has taken up number of steps and introduced reforms in capital market. It has been constantly making new initiatives to ensure that the underdeveloped and unregulated capital markets are properly and effectively reformed so that they grow, integrate and consolidate over a period of time.

SEBI Mainly concentrated on the following areas of capital markets
  1. Increasing Market Transparency : To achieve this objective it has taken steps to improve disclosure standards.
  2. Improving the standards of Corporate Governance : To achieve this, SEBI focused its attention on composition of board of directors, remuneration of directors, constituti0on of audit committees etc. Stock markets has to seek a report from each listed company on compliance of corporate governance.
  3. Improving Market Efficiency : To achieve this objective, the SEBI seeded up the process of dematerialization and taken steps to introduce rolling settlement in a phased way.
  4. Reduction of Transaction Cost : The margin system was refined.
  5. Enhancing the Market Safety : To achieve this SEBI has introduced surveillance system. The main purpose of survelience system is to bring integrity, safety and stability in the Indian Securities market so that scams are either eliminated or their impact is minimized.
Despite SEBI's major policy initiatives for the development of securities market over last nine years, the fruits of these efforts were not clearly evident because o fa number of factors such as
  1. Sluggish markets all over the world
  2. Cross-border complexities,
  3. Impact of other financial markets like currency, commodities and property
  4. Footloose attitude of many of the players in different markets and so on.
SEBI has been successful in terms of setting up a mature regulatory framework and establishing proper monitoring system through its market surveillance, though there were cases where some of the share brokers and other market players through their ingenuity and smartness took the capital markets for a ride.

SEBI has all the powers of a civil court under the Code of Civil Procedure, 1908 for discharging the above functions and it can
  1. Direct for production of books and accounts and other documents, at such place and such time as may be specified (by SEBI)
  2. Summon and enforce the attendance of persons and examining them on oath
  3. Inspect any books, registers and other documents of any person refferred to 
That's all for now friends. in our next post we shall discuss about the Achievements of SEBI. Happy Reading :)

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