Establishment

In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992. PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as ..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto

Objectives of SEBI
The primary objective of SEBI is to promote healthy and orderly growth -of the securities market and secure investor protection. The objectives of SEBI are as follows: To protect the interest of investors, so that, there is a steady flow of savings into the capital market. To regulate the securities market and ensure fair practices. To promote efficient services by brokers, merchant bankers, and other intermediaries, so that, they become competitive and professional.

The SEBI Act, 1992 has entrusted with two functions, they are Regulatory functions And Developmental functions

Regulatory Functions
Regulation of stock exchange and self regulatory organizations. Registration and regulation of stock brokers, sub-brokers, Registrars to all issues, merchant bankers, underwriters, portfolio managers etc. Registration and regulation of the working of collective investment schemes including mutual funds. Prohibition of fraudulent and unfair trade practices relating to securities market. Prohibition of insider trading Regulating substantial acquisition of shares and takeover of companies.

 SEBI has three functions rolled into one body: quasilegislative, quasi-judicial and quasi-executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeals process to create accountability

SEBI Regulation

SEBI regulates Primary Market Secondary Market Mutual Funds

FII

Developmental Functions
Promoting investors education Training of intermediaries Conducting research and publishing information useful to all market participants. Promotion of fair practices Promotion of self regulatory organizations

Uniform script specific price bands

To contain abnormal price variations, the SEBI had introduced the system of scrip specific daily price bands. In January, 2000 it was decided in principle to allow a further variation of 4 per cent in the scrip prices beyond the existing limit of 8 per cent after a cooling off period of 30 minutes. This is expected to provide additional exit route to investors.

Investigations
Investigations are carried out with a view to gather evidence of alleged violations of securities market such as price rigging, creation of artificial market, insider trading, public issue related irregularities and other misconduct, as well as to find out persons/entities behind these irregularities and violations. SEBI has been strengthening its investigation activities over the years and these activities were further strengthened during 1999-2000.

Powers of SEBI
Power to call periodical returns from recognized stock exchanges. Power to compel listing of securities by public companies. Power to levy fees or other charges for carrying out the purposes of regulation. Power to call information or explanation from recognized stock exchanges or their members. Power to grant approval to bye-laws of recognized stock exchanges.

Powers of SEBI
Power to control and regulate stock exchanges. Power to direct enquiries to be made in relation to affairs of stock exchanges or their members. Power to make or amend bye-laws of recognized stock exchanges. Power to grant registration to market intermediaries. Power to declare applicability of Section 17 of the Securities Contract (Regulation) Act 1956, in any State or area, to grant licenses to dealers in securities.

Public Issue
Any company or a listed company making a public issue or a rights issue of value of more than Rs 50 lakhs is required to file a draft offer document with SEBI for its observations. The company can proceed further only after getting observations from SEBI. The company has to open its issue within three months from the date of SEBI's observation letter. Through public issues, SEBI has laid down eligibility norms for entities accessing the primary market. The entry norms are only for companies making a public issue (IPO or FPO) and not for listed company making a rights issue.

Regulation by SEBI: Recent Cases

VEDANTA-CAIRN ISSUE SEBI has not yet cleared Vedanta group's open offer for Cairn India, a mandatory requirement for conclusion of London-based mining group's $9.6 billion acquisition to foray into oil sector. London-listed Vedanta had in August last year agreed to buy up to 51 per cent stake in Cairn India from Cairn Energy Plc. Following the acquisition, its group firm Sesa Goa was to make an open offer for buying an additional 20 per cent in the company that owns India's largest on land oil field. But the company could not make the open offer following an oil ministry intervention with SEBI. The ministry said the deal was contingent upon government approval, which is still under process. SEBI is holding back the approval for the open offer as the government is yet to give its go ahead.
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Regulation by SEBI: Recent Cases

DECCAN-CHRONICLE HOLDINGS Ltd. ISSUE Sebi allowed the Deccan Chronicle Holdings Ltd to buy-back 3.45 crore shares or 14.17 per cent equity from the market at an estimated cost of Rs 270 crore. This will be the second time the Deccan Chronicle would come out with an offer to buy-back its shares, following which the equity of the promoters in the company could go up to 73.83 per cent from 63.37 per cent currently. SEBI, while exempting Deccan Chronicle from making the mandatory public announcement before coming out with the buy-back offer, has, however, asked the company "not of seek any further exemption pursuant to any further buy-back". Referring to the general issue of companies buying back their own shares, Sebi order said, "repeated buy-back offers by a company is not something that Sebi, as a regulator, would like to encourage, given the fact that it would be misused by entities to consolidate their holding at 15 the expense of the company.

Sebi fines Satyam official in insider trading case

The market regulator, Securities and Exchange Board of India (Sebi) has levied a fine of Rs 5 lakh on a senior official of Satyam Computer Services for not closing the trading window in time. G Jayaraman, compliance officer of the company allegedly failed to close the trading window during the announcement of acquisition of Maytas by Satyam and its subsequent cancellation in December 2008. He also did not close the window before the subsequent confession by then chairman Ramalinga Raju in January 2009 of a massive scam. According to Sebi, since Jayaraman did not close the trading window despite being aware of unpublished price sensitive information it led to some employees and clients selling the stock during what should have been a no-trade period.

Sebi to take action against NSDL for 2003-05 IPO scam

Securities and Exchange Board of India (SEBI), the capital market regulator informed the Supreme Court, on Monday, that it will look into the report on the National Securities Depository Limited's (NSDL) failure that led to the initial public offering (IPO) scam of 2003-05. The probe by Sebi revealed that, what was kept for retail investors shares were acquired illegally by some large investors through at least 59,000 fake demat accounts.

IPO Scam
The Securities and Exchange Board of Indias (SEBI) decisive crackdown against rampant manipulation of initial public offerings (IPOs) for several years is welcome. At the end of December 2011, SEBI issued ad interim orders against seven companiesTaksheel Solutions, RDB Rasayans, Onelife Capital Advisors, Brooks Laboratories, PG Electroplast, Tijaria Polypipes and Bharatiya Global Infomediaand nearly a 100 officials and investment bankers associated with them, barring them from accessing the capital market. The orders exposed their fraudulent intent, diversion of funds and false/fabricated or concealed information. companies collude with investment bankers and a set of market operators or high net-worth individuals (HNIs) to fix the entire process, to rip off investors. companies collude with investment bankers and a set of market operators or high net-worth individuals (HNIs) to fix the entire process, to rip off investors.

IPO Scam broker fined

Market regulator Sebi today directed Purshottam G Budhwani, a broker involved in the infamous IPO scam of 2003-05, to deposit over Rs 9.39 crore on unlawful gains made by him. Budhwani was charged with involvement in the IPO scam and cornering shares meant for retail investors in 13 initial public offerings by engineering multiple applications. "He opened 6,685 demat accounts (afferent accounts), in concert with depository participants (DPs), in favour of the afferent persons. All the afferent accounts carried his name," Sebi said. Sebi said Budhwani repeated the modus operandi in 13 IPOs -IL&FS, IDFC, Gateway Distriparks, Shoppers Stop, MSP Steel & Power, Yes Bank, SPL Industries, Provogue, Gokuldas Exports, Tata Consultancy Services, Nectar Lifesciences, Sasaken Communications Technologies and Suzlon Energy.

Shriram Mutual Fund

In the wake of sudden payment crisis in the month of June 1998, on The Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE) and allegations of manipulation in the scrips of BPL Ltd., Videocon International Ltd. (Videocon) Sterlite Industries Ltd., investigations were undertaken by SEBI. It was also alleged that Shriram Mutual Fund (SRMF) had helped certain brokers of BSE who were having payment problems and purchased shares of Videocon in pursuance to buy-back arrangement. Investigations by SEBI revealed that a company belonging to Shriram group, purchased large quantities of shares of Videocon to help out brokers of BSE who were having payment problems. Out of these purchases, part of the shares were sold to SRMF as cross deal at a price which was much higher than the market price prevailing on the date of purchase. Investigations also revealed that the purchase of these shares by SRMF, in a falling market, was for extraneous considerations rather than a normal investment decision and pursuant to buyback arrangement. It was also seen that Shriram Group (who is the promoter of Shriram Mutual Fund) and Videocon Group of Companies were close associates of each other. An attempt was made to create record to show that purchase price was not higher than the market price by ante-dating the purchase i.e. showing that the purchase was made on a date prior to the actual date of purchase. As a result of investigations, enquiry proceedings were initiated against the brokers involved for falsifying the records. Adjudication proceedings were initiated against Shriram Asset Management Co. Ltd. (SAMC) and on completion of the proceedings a fine of Rs. 5 lacs was imposed on SAMC. Further, directions were given under Section 11B of the SEBI Act, to the Sponsors of SRMF to pay with interest towards the loss caused to the unit-holders for making purchases at a price higher than the market price. Consequent to initiation of proceedings, the Managing Director of SAMC, resigned from the office. Directions have been issued making him ineligible to hold any public position in any capital related public institution for a period of three years. It was also directed that 2 other key persons who assisted the Managing Director in these operations and were still with SAMC should resign with immediate effect. The trustees were also asked to step down and Board of Trustees be reconstitute

Adani Exportd Ltd.

During the period of investigation, the price of the scrip on BSE increased from `209.55 as on November 27, 2003 to `443.10 as on December 23, 2003 after touching a high of `478 as on December 19, 2003 within a span of just 19 trading days. SEBI analyzed the trading details along with the data of the volumes contributed by the persons who had traded in the scrip. The investigation prima facie revealed that certain entities had indulged in fictitious synchronized reversal of trades, which in turn had created the artificial volumes and contributed to the price rise in the scrip of Adani. Shri Prashant Saran, Whole Time Member, SEBI, has passed an order dated February 22, 2012, in the matter of Adani Exports Limited, restraining Ms. Bela Kayastha, Mr. Samir P. Shah, Ms. Falguni Shah, Mr. Manoj T. Shah, M/s. Rajesh N. Jhaveri, M/s. V & S Intermediaries, Mr. Mangeram S. Sharma, Mr. Dilip C. Jain and Mr. Tejas Ghelani from buying, selling or dealing in securities market in any manner whatsoever or accessing the securities market directly or indirectly for a period of two years from the date of the order.

Inaugurating the Conference, Mr. U K Sinha, Chairman, SEBI called for more research in the field of investor education. He also said that the various financial regulators in India and the Government of India are working together in the formulation of a National Policy on Financial Education. Emphasizing that investor grievance redressal should be a matter of priority, Mr. Sinha said that an effective grievance redressal mechanism should have features like uniformity, predictability and consistency. This is interesting because the apparent failure of SEBIs surveillance department and its sophisticated software has been repeatedly raised byMoneylife. The regulator has scrapped one expensive inter-market surveillance system (of HCL Technologies) and decided to replace it with another from TCS (Tata Consultancy Services) without a word of explanation. The orders also raise serious questions about SEBIs process of vetting IPOs which is clearly flawed. Will anyone in the government finally ask SEBI about the quality of its surveillance software, if it fails to catch even large connections such as promoters and directors of listed entities? Wed say both! Think about it at a time when the US Securities and Exchange commission is creating benchmarks after benchmarks in ensuring that not only are US stock markets pristinely transparent, but also that they are rid of the scourge of insider trading by targeting and prosecuting all guilty parties, SEBI is still trying to find its feet in understanding what constitutes insider trading. Frankly, for much of the history since it came into existence in 1992, taking over command from the Comptroller of Capital Issues, SEBI has been up a blind alley on insider trading.