What is SEBI? Structure & Functions

Introduction to SEBI 

 

Established on April 12, 1992, the Securities and Exchange Board of India is a regulatory body or organization operating under the umbrella of the Government of India (Ministry of Finance). 

 

Responsible for monitoring the national capital and the securities market, the headquarters of SEBI or the Securities and Exchange Board of India are located in Mumbai, Maharashtra, India. Working towards the regulation of the Indian capital and securities, this organization has several roles and responsibilities that fall under its functions. 

 

With a vision to protect the interests of the investors and an objective to develop the market of securities, SEBI is headed by its chairman - Ajay Tyagi. Under the SEBI Act of 1992, the board received its powers and roles from January 30, 1992. 

 

(Related blog: Largest Stock Exchanges in World)

 

 

What is the Structure of SEBI? 

 

The organizational structure of the Securities and Exchange Board of India begins with the Board Members including the Chairman of SEBI. 

 

However, the organizational structure of the statutory body comprises the Board (5 members) and 24 departments that together work towards the regulation and surveillance of the financial market of the country. 

 

Let us discover more about the structure of the Securities and Exchange Board of India. 

 

Board Members-

 

• Shri Ajay Tyagi

• Shri G. Mahalingam

• Ms. Madhabi Puri Buch

• Shri S.K. Mohanty

• Shri Ananta Barua

 

Following the board of SEBI, the organization is further segregated into 24 departments that work under the jurisdiction of the Ministry of Finance as one single entity. These are as follows:-

 

1. Commodity Derivatives Market Regulation Department

 

This department is responsible to maintain surveillance over the working of Commodity Derivative Segments of Recognized Stock Exchanges/Recognized Clearing Corporations and supervise their operations altogether. 

 

This role is carried out by 9 divisions of the department namely-

 

• Division of Exchange Administration.

• Division of Complaints

• Division of Investor Awareness -1

• Division of Investor Awareness -2

• Division of Market Policy

• Division of New Products

• Division of Risk Management

• Division of Products

• Division of Inspection

 

(Read about: What is Risk Management?)

 

2. Corporation Finance Department

 

This department is required to work around the following areas-

 

• Listing and issuing of securities 

• Schemes including mergers, divisions, accumulations, reduction in finances

• Governance of corporate organizations and auditing criteria 

• Restructuring of corporate organizations through takeovers/ mergers/ buy-backs

• Delisting of a security

 

This department’s roles and responsibilities are fulfilled by 3 divisions namely- Division of Issues and Listing, Division of Corporate Restructuring, and the Division of Compliance and Monitoring 

 

3. Corporation Finance Investigation Department

 

This department is responsible for investigating matters related to financial fraud, diversion of funds, non-compliance with rules, and mis-conduct of fiscal matters. 

 

4. Department Economic and Policy Analysis

 

The Department of Economic and Policy Analysis deals with matters of statistics and publication and regulatory research. Furthermore, this department’s responsibilities revolve around the updation of details and regulatory developments. 

 

5. Department of Debt and Hybrid Securities

 

This department is concerned with matters related to corporate bonds, debt securities, and shares. This is done through the operation of 3 divisions (Division 1, Division 2, Division 3) that monitor primary issuance and debt securities policy, post-listing compliance, and Municipal Bonds and Green Bonds respectively. 

 

(Related blog: Types of Bonds)

 

6. Enforcement Department - 1

 

The Enforcement Department - 1 looks after appeals reported against SEBI in the Securities Appellate Tribunal (SAT). The division operating under this department is the Division of Regulatory Action. 

 

7. Enforcement Department - 2

 

Similar to the functions of the Enforcement Department - 1, this department’s functions too revolve around resolving matters registered with SAT. 

 

The divisions working under the jurisdiction of this department are as follows-

 

• SAT Litigation Division

• Prosecution Division

• Settlement Division

 

8. Enquiries and Adjudication Department

 

The department of Enquiries and Adjudication is concerned about quasi-judicial issues and adjudicates upon those matters that are reported against the violators as per the jurisdiction of SEBI. 

 

9. General Services Department

 

The General Services Department looks after the internal working of the organization. The following divisions operate under the leadership of this department- 

 

• Treasury and Accounts Division

• Facilities Management Division

• Official Language Division

• Office of the Secretary to the Board

• Protocol and Security Division

 

10. Recovery and Refund Department

 

The Recovery and Refund Department looks after procuring recoveries from defaulters who fail to pay dues. The divisions that operate under this department are as follows- 

 

• Recovery Division 1

• Recovery Division 2

• Recovery Division 3

• Special Enforcement Cell 

 

(Also read: Types of financial risk)

 

11. Human Resources Department

 

The department looks after human resources and conducts recruitment processes for the organization. 

 

12. Division of Foreign Portfolio Investors and Custodians

 

This department looks after foreign investors who invest in the securities market and deal with the custody of securities in the international sphere. 

 

13. Information Technology Department

 

The department conducts technological operations in the organization. 

 

14. Integrated Surveillance Department

 

The department is concerned with the monitoring of all domains of the securities Market. 

 

15. Investigations Department

 

The Investigations Department is concerned with investigating and inspecting matters of susceptible breach in the Securities Market. This department also provides the leads to the Enforcement Department for further proceedings in the judicial realm. 

 

16. Investment Management Department

 

This department deals with the management of financial investments in the Securities Market. 

 

(Must check: Benefits of Stock Market)

 

17. Legal Affairs Department

 

The Legal Affairs Department is required to provide legal consultation to the board of the organization and it handles the functions through the following divisions-

 

• Divisions of Policy- General

• Division of Policy and Regulatory Affairs for Commodity Derivatives.

• Division of Regulatory Assistance - General

• Division of Regulatory Assistance for Commodity Derivatives

 

18. Market Intermediaries Regulation and Supervision Department

 

This domain works along the lines of supervision of market mediators and regulates their operations from registration to inspections. 

 

19. Market Regulation Department

 

The department regulates the infrastructure of market institutions like stock exchanges and supervises the functioning of them all around. The following divisions work under this department- 

 

• Division of Policy (DoP)

• Division of SRO Administration (DSA)

• Division of Risk Management and New Products (DRMNP)

• Division of Market supervision (DMS)

• Investor Complaints Cell (ICC)

 

20. Office of International Affairs

 

The Office of International Affairs promotes the regulation of the Securities market in consultation and regard with foreign bodies like SEBI. It also works towards the protection of investors by engaging with foreign regulatory bodies and organizations. 

 

21. Office of Investor Assistance and Education

 

This department focuses to impart investor education and guide investors in the right direction. Furthermore, it is required to assist investors and will deal with complaints related to the transfer of securities, company listings, and governance matters. 

 

22. Office of the Chairman

 

The Office is headed by the Sebi chairman - Shri Ajay Tyagi. It has 2 divisions headed by the office- Communications Division and Executive Assistant. 

 

23. Regional Offices

 

The regional offices are required to work along the lines of the organization’s vision and report to the regional heads.

 

24. Vigilance Department

 

The Vigilation Department is headed by the Chief Vigilance Officer. The role of this department is to detect mishappenings in the organization, put an end to corruption within the organization, and take preventive measures for the same. 

 

 

Evolution of SEBI 

 

Primarily established as a non-statutory body in the year 1988, the Securities and Exchange Board of India became independent on January 30, 1992, when the SEBI Act (1992) came into existence. 

 

Officially established in its present nature on April 12, 1992, SEBI is a government organization that operates under the jurisdiction of the Ministry of Finance. Over time, the organization has worked towards its vision of protecting the investors’ interests and regulating the Securities Market. 

 

By formulating numerous committees and taking various actions in order to maintain a harmonious environment in the market, SEBI has been introducing major informatory steps. 

 

“SEBI has also proposed a detailed ‘advertisement code’ for those providing investment advice to check misleading advertisements promising unrealistic returns in the securities market.”SEBI regulations 

 

Powers of SEBI

 

When it comes to the powers of SEBI, there are 3 main powers of the organization. They are as follows-

 

1. Quasi-Judicial - The first and foremost power of this organization is that it has partial judicial powers in declaring judgments in fraudulent matters or misconduct in the Securities Market. 

 

2. Quasi-Executive -The organization also has the power to incorporate rules and implement legal actions in order to establish an environment of fairness and transparency in the market. It can also take steps against violators. 

 

3. Quasi-Legislative - The third power of SEBI falls in the legislative domain. The organization has the power to formulate laws and regulations and frame guidelines in order to protect the rights of investors and keep violations at bay. 

 

What’s more, the operations of SEBI are overlooked by the Supreme Court of India and the Securities Appellate Tribunal (SAT). 

 

(Referred blog: What are Derivatives?)

 

 

What are the Roles and Responsibilities of SEBI? 

 

In this segment, we will discuss the various roles that the organization has in order to gain a better insight into the same. Let’s get started! Here is a brief introduction to the roles and responsibilities of the Securities and Exchange Board of India and various objectives of SEBI.

 

1. The primary role of SEBI is to preserve the rights of investors in the Securities Market and promote the development of securities in the domain.

2. It is responsible for providing a fair and transparent platform to share brokers, sub-brokers, bankers, agents, merchants, advisers, and other professionals to take part in the market and regulate its operations. One of the functions of SEBI is also to regulate the functioning of securities, custodians of securities, and foreign investors. 

3. SEBI is responsible for the prevention of frauds and misconducts in the Securities market. It is also responsible for the prohibition of insider trading in the sphere. 

4. The organization is required to impart investor education, trading regulations , and educate investors about investment mediators too

5. It is responsible for the surveillance of shareholding and take-over of companies, or even mergers in the corporate sphere. Another role of SEBI in the capital market is to take care of research and development of the market round the clock. 

 

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Summing Up

 

To sum up, the Securities and Exchange Board of India is a statutory body that has its headquarters located in Mumbai, Maharashtra, India. One of the most reputed and dignitary set-ups from worldwide, SEBI is known for its preventive actions and regulations in order to maintain vigil across the securities market. 

 

(Also read: Largest Economies in the World)

 

Established on April 12, 1988, this body has been in function for over several decades and continues to possess a visionary attitude in order to maintain discipline in the realm of the securities market and related domains. 

 

With more than 20 departments to conduct its operations around the country, SEBI holds a firm position in the eyes of its people.