The recent news in the securities market industry revolves around the Securities Appellate Tribunal (SAT) suspending an order previously set by the Securities and Exchange Board of India (SEBI). Originally, SEBI issued a one-year ban on a retail company Chairperson and several other promoters from operating in the securities market. This article will delve into the details of these statutory bodies and their role in the Indian financial ecosystem.
Understanding the Securities Appellate Tribunal (SAT)
SAT is a statutory body established under section 15K of the SEBI Act, 1992. Based in Mumbai, its composition includes a Presiding Officer and two additional members. The Central Government, in consultation with the Chief Justice of India or his nominee, appoints the Presiding Officer of SAT.
As a powerful body, SAT has identical powers to those of a civil court. If a person or entity disagrees with the decision or order passed by SAT, they have the right to appeal to the Supreme Court.
The primary functions of SAT are to hear and dispose of appeals against orders passed by several institutions such as SEBI, the Pension Fund Regulatory and Development Authority (PFRDA), or the Insurance Regulatory Development Authority of India (IRDAI).
Unpacking the Role of the Securities and Exchange Board of India (SEBI)
SEBI is another statutory body put into place in 1992 based on the provisions of the SEBI Act, 1992. Initially, it functioned as a non-statutory body until April 1988, when it was formalized as the regulator of capital markets in India. Capital markets refer to facilities and arrangements through which long-term funds, both debt and equity, are raised and invested.
SEBI has its headquarters based in Mumbai, with regional offices in Ahmedabad, Kolkata, Chennai, and Delhi. The Board of SEBI, consisting of a Chairman and eight other members, makes all decisions. Various committees are appointed by SEBI as required, to investigate and address pressing issues.
Ensuring Investor Protection and Market Regulation
The primary function of SEBI is to safeguard the interests of investors in securities and foster the promotion and regulation of the securities market. Securities, regarded as tradable financial instruments, are employed to raise capital in public and private markets. There are three types of securities: equity (providing ownership rights to holders), debt (loans repaid with periodic payments), and hybrids (which combine aspects of debt and equity).
SEBI bears the responsibility of registering and regulating the workings of several market intermediaries such as stock brokers, merchant bankers, underwriters, portfolio managers, investment advisers, and any other intermediaries associated with securities markets.
This statutory body operates in a quasi-legislative, quasi-judicial, and quasi-executive manner, enabling it to draft regulations, carry out inquiries, pass rulings, and impose penalties.
By understanding these entities and their functions, one can better grasp the recent decision of SAT to stay the one-year ban order passed by SEBI, considering the significant roles these institutions play in India’s financial market ecosystem.
