SEBI assures that it safeguards the interest of investors by ensuring that the guidelines and regulations are adhered to. It serves as a watchdog which is an anonymous body that manages the flows of the entire stock market in the country.

What is SEBI and how it established?

By the end of 1970, the capital market began to emerge as a sensation. As people started trading and it became really popular, various malpractices started to begin such as insider trading, price rigging, and violation of stock exchange rules, price rigging and other such activities. Once this started happening, then the government realized that they require a body to lessen these malpractices. Also, it was essential to form an authority that could regulate the working of the Indian Securities market so that the trust of people could be built again. Thus the underlying motive of its establishment was to assure that Indian Capital Market works in a streamlines way and gives the investors a transparent environment for investing their valuable and hard-earned money. Then the established SEBI to conduct various activities such as:

Creating and approving the by-laws of stock exchanges Inspecting accounting books of various recognized stock exchanges in India Inspecting books and records of Financial Intermediaries SEBI could also stop companies from getting listed on any stock exchange Handling registration of stockbrokers

The Head office of SEBI is Bandra Kurla Complex in Mumbai. It has its regional offices in New Delhi, Chennai, Kolkata and Ahmadabad. Additionally, some of its local offices are situated in Bangalore, Chandigarh, Jaipur, Guwahati, Kochi and Patna.

Structure of SEBI

As of now, 17 exchanges are operating in India, and the guidelines of SEBI regulate all the trades, including NSE and BSE. The current Chairman of SEBI is Ajay Tyagi; he was appointed on 10th January 2017. He took over the charge from U.K Sinha on 1st March 2017. Just like other corporate forms, SEBI has a hierarchical structure which comprises of various departments that are headed by their department heads. It has one Chairman, 7 boards of members and around 20 departments. Here is the list of a few departments of SEBI:

Corporate Finance Human Resources Department Economic & Policy Analysis Foreign Portfolio Investors & Custodians Debt & Hybrid Securities Information Technology Enforcement Investment Management Department Legal Affairs Office of International Affairs Commodity Derivates market regulation National Institute of Securities Market and more

Their respective heads head all of the departments. the senior management consists of a board of directors with the following structure-

Union Government of India nominates the Chairman. Two members from the Union Finance Ministry One member from Reserve Bank of India Union Government of India nominates the rest five members

It is paramount for you to know that SEBI is responsive to 3 groups that make the market which is the investors, market intermediaries and issuer of securities.

Objectives of SEBI

The primary objective of SEBI is to ensure that the Indian stock market works systematically. Also, it safeguards the interest of traders and investors by giving them healthy in securities. SEBI even works on the development of equity markets and ensures that people adhere to the guidelines. As mentioned above, one of the objectives of its establishment is to assure that no malpractices are followed in the Indian Capital Market. Here is a list of the significant objectives of SEBI:

Monitors important acquisition of shares and takeover of companies Protect the interest of investors Promoting the development of securities market and regulating the business It is also involved in research & development so that the stock market is efficient and updated with the advanced techniques. It offers a platform for sub-brokers, registrars, stockbrokers, portfolio managers, investment advisers, bankers, merchant bankers, share transfer agents, trustees of trust deeds, underwriters, and other associated people to register and regulate work. They also check that the investors are educated about the intermediaries of the securities market They also keep a close check that no fraudulent or unfair practices are done related to the securities market. It also controls the operations of participants, credit rating agencies, and custodians of securities, depositories and foreign portfolio investors.

Also Read: How to Start Investing in Share Market (Beginners Guide)

Functions of SEBI

Primarily there are three key functions performed by SEBI: A. Protective Functions- This function is performed by SEBI to conserve the interest of investors and financial institutions. Its core protective functions are to check:

DEMAT Form of securities IPO is permitted through an exchange Education of electronic platform for financial market Information on discount brokerage Underwriting is optional to lessen the cost of issue Training for financial intermediaries

The objective of SEBI is to promote fair practices; hence, it educates them about it plus makes the investors aware of the stock market in depth. C. Regulatory Functions- In the regulatory functions, SEBI does the monitoring of the functioning of financial market go-betweens. The implementation of SEBI bye-laws emissaries and corporate is done. This is a vital step as it ensures that the stock market operates seamlessly with untarnished transparency. It is the role of SEBI to formulate guidelines and code of conduct for financial intermediaries and regulate amalgamations, alliance and takeovers takeover of companies. Some of its regulatory functions are:

Registering and regulating functions of mutual funds Regulates takeover of companies It has to register all share transfer agents, intermediaries, trustees, brokers, sub-brokers and other people involved with the stock exchange Conduct inquiries & audit of exchanges

Also, SEBI has the authority to charge a fee on capital market participants. Plus, it also directs the credit rating agencies. Also Read: Top 25 Indian Companies by Market Capitalization

Role of SEBI

SBI caters to the requirement of three parties that operate in the Indian Capital Market. It was founded to improve the financial market of India, hence to obtain its purpose it takes care of the most vital financial market participants:

Authority and Power of SEBI

SEBI possesses high authority and power as its primary purpose was to control the market systematically by preventing any fraudulent activity. It has three significant powers:

Mutual Funds and SEBI

Asset Management companies run mutual funds, and that needs to be passed by SEBI. A watchdog that is listed with SEBI holds the securities of varied schemes of the fund. The performance of mutual funds is monitored by the trustees of AMC to make sure that they work as per the SEBI guidelines. A firm needs to be established as a separate AMC if it wants to offer mutual funds. Also, the firm should have a net worth of Rs.50,00,000. In case the mutual funds are exquisitely dealing with the money market, then it is a mandate for them to be registered with RBI. All the additional funds can be filed with SEBI. A couple of years back a new self-regulation agency for mutual funds has been set up that is called Association of Mutual Funds of India. It aims to enhance operational standards and to ensure that it works with complete professional and ethical qualities.

Method for registering a mutual fund with SEBI

As per the guidelines by SEBI, any appellant who wishes to apply for listing should be done through the Form A which has been laid under Schedule I of SEBI Regulations 1996. A person who has more than or equal to 40% of the Net Worth of the Assets of the company should be presumed as a Sponsor, and only he should apply in Form A. These are the few things that a person should have to apply for it:

While filling the Form A, it is mandatory to submit a non-refundable fee of Rs.5 lakh. After doing this, SEBI would examine the application as per the eligibility criteria. If you meet the criteria, after that, you would have to complete other formalities like executing the trust deed, incorporating the asset management company, setting up a trustee company, etc. Once the sponsor meets all the conditions after that SEBI would provide a registration certificate after that, you have to pay a registration fee of Rs.25 lakh.

SEBI guidelines on Mutual Funds Reclassification

SEBI has suggested 6 classifications for hybrid, 10 classifications for equity funds, 16 for debt funds and 2 for index funds Debt fund classification is recommended based on the duration of fund and asset quality mix It has also taken over large, mid and small-cap based on the market-related rankings Funds should be names as per the core intent of the fund and asset mix. Ensure that it should state the risk associated clearly

Mutual Funds Regulation by SEBI

Shareholders do not have authority to hold more than 10% of the shareholding directly or indirectly in the AMC of a mutual fund The increasing weight of the top three constituents of the index should not be more than 65% It is a mandate that every new fund should submit their compliance status to SEBI before launch Any investor of the liquid scheme who exits within seven days would have to pay a penalty Liquid schemes should hold a minimum of 20% in liquid assets like treasury bills, government securities, cash and rep on government securities.

Recommended: 10 Best Discount Brokers in India (2020) The stock market is one of the most significant pointers of the economic health of the country. Thus, it is crucial that people should keep faith in it else the people would stop investing, and the market would go down. Before the establishment of SEBI, many fraudulent and scams took place, but since it came into the picture, the market has become healthier and transparent.