Securities and Exchange Board of India (SEBI) recently announced former whole-time member Madhabi Puri Buch as its new chairperson. This historic appointment marks the first time a woman has led the market regulator. Her term will span across three years. SEBI also kick-started 2022 by launching Saa₹thi, a mobile app focused on investor education.
About SEBI
The Securities and Exchange Board of India, a statutory body established by parliament, was set up on 12th April, 1992 under the Securities and Exchange Board of India Act, 1992. SEBI’s central functions include safeguarding investor interests in securities and the regulation and promotion of the securities market. The organization is headquartered in Mumbai, with regional offices in Ahmedabad, Kolkata, Chennai, and Delhi.
Before SEBI, the regulatory authority was the Controller of Capital Issues, which derived its power from the Capital Issues (Control) Act, 1947. In April 1988, SEBI emerged as the capital markets regulator in India under a resolution of the Government of India. Initially, SEBI was a non-statutory body without any statutory power. It became autonomous and gained statutory powers through the SEBI Act 1992.
The Structure of SEBI
SEBI’s organizational structure consists of a board with a chairman and several other whole-time and part-time members. The body forms committees as needed to address pressing issues. A Securities Appellate Tribunal (SAT) exists to protect entities feeling aggrieved by SEBI’s decisions. SAT comprises a presiding officer and two other members and possesses the same powers as a civil court. Entities unsatisfied with SAT’s decisions can appeal to the Supreme Court.
SEBI’s Powers And Functions
As a quasi-legislative and quasi-judicial body, SEBI can draft regulations, conduct inquiries, pass rulings, and impose penalties. SEBI’s functions are designed to meet the needs of three categories:
1. Issuers: SEBI provides a marketplace where issuers can raise finance.
2. Investors: SEBI ensures investor safety and accurate information supply.
3. Intermediaries: SEBI fosters a competitive, professional market for intermediaries.
With the Securities Laws (Amendment) Act, 2014, SEBI gained the power to regulate any money-pooling scheme worth Rs. 100 cr. or more and to attach assets in non-compliance cases. The SEBI Chairman has the authority to order “search and seizure operations,” while the SEBI board can seek transaction-related information from any person or entity under investigation.
SEBI’s Challenges and Concerns
In recent years, SEBI’s role has become more complex, and the capital markets regulator stands at crossroads. There is an excessive focus on market conduct regulation, while prudential regulation is somewhat neglected. SEBI’s enforcement powers exceed those of its counterparts in the US and UK, enabling it to inflict substantial economic injury. SEBI’s legislative powers are nearly absolute as the SEBI Act grants wide discretion to make subordinate legislation.
There are concerns about the fear of the regulator, imperfect regulation, and bulky securities offering documents that lean more towards formal compliance over substantive, high-quality disclosures.
Way Forward
SEBI needs attitudinal change, prioritizing policy space cleaning in the market. The organization’s human resources and internal matters require particular attention, including encouraging lateral entry for talent acquisition. SEBI faces an open area of work in aligning and fitting senior employees upon the Forward Markets Commission merger into SEBI.
Strengthened enforcement, continuous monitoring, and improved market intelligence could further enhance SEBI’s functions. Given the segmentation in India’s financial markets, exploring a unified financial regulator could resolve remit overlap and excluded boundaries over financial products.
