The Securities and Exchange Board of India (SEBI) is a statutory authority established in 1988. It acts as the supervisory body for the Indian securities market. SEBI is the successor of the Controller of Capital Issues. The SEBI was given statutory power under The Securities and Exchange Board of India Act in 1992 enacted by the Central Government.

The fundamental object behind the Act is to provide for the constitution of SEBI with a view to care for the depositor in securities and to advance the progression of SEBI. The Act also aims to standardize the securities market and other issues related to the Board. The SEBI shall have the status of a company with the right to litigate, purchase, hold and organize assets and right to enter into agreement.

The Board consists of a Chairman and two other members from the Ministry of Finance of the Union, one member to be an official of Reserve Bank and five other members to be appointed by the Union. The Chairman and other members shall have capability, truthfulness and standing, they should have special knowledge in the subjects connected therewith. The members shall have the power to administer, direct and manage the affairs of the Board and exercise such other powers instituted by the Act.

The meeting of the Board shall be conducted as per regulations and the rules of proceedings as prescribed, and the decision of the Board shall be on the basis of majority. The Act further provides for the transfer of assets and legal responsibilities of the existing Board to the newly elected Board.

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The Act imposes duty on the Board to safeguard the interest of the Shareholders in securities and to encourage the advancement of the securities market. The SEBI shall control the industry of stock exchanges and register the works of stock brokers or agents. The registering of activities of depositories or investors is also vested with the Board. The Act expressly prohibits deceptive and unjust trade practices and the SEBI is obliged to supervise the matter therewith.

The Board shall control or forbid issue of prospectus, present document or announcement seeking fund for the issue of securities. The Board is empowered to issue directions to restrict and manage the affairs of mediator, to any individual or group of individuals related to the securities market or to any company. The Board formulates rules and regulations, performs investigation, acts as an enforcement agency and pronounces orders as a quasi judicial body.

The Board is required to retain appropriate accounts and other important records and organize an annual statement in the mode approved by the Central Government, seeking advice from the Comptroller and Auditor General of India (CAG). The CAG shall audit the accounts of SEBI at the specified time and the expenses sustained in relation to the Audit shall be owed by the Board to the CAG.

Any party aggrieved by the order of the Board shall prefer an appeal to the Securities Appellate Tribunal and thereafter to the High Court. The final appellate body shall be the Supreme Court whose decision shall be ultimate. The Special Appellate Tribunal shall be guided by the natural justice principle and not by the Civil Procedure Code. The Act penalizes for failure to deliver information, returns etc. as prescribed under the Act. The Act empowers the Central Government to issue directions and take the place of the Board in certain matters. The Civil Court do not have power to hear matters exclusively within the jurisdiction of the authorities under the Act.

The Act repealed The Securities and Exchange Board of India Ordinance, 1992. The SEBI Act 1992 has been amended by enacting Securities and Exchange Board of India (Amendment) Act, 2002. Hence, SEBI has acted as a regulatory body by introducing orderly reforms effectively as provided under the 1992 Act.

Download PDF: The Securities and Exchange Board of India Act,1992