SEBI: Securities and Exchange Board of India

Table of contents

• What is SEBI?
• History and formation of SEBI
• Functions and powers of SEBI
• Mutual funds guidelines of SEBI
• Important SEBI rules
• How SEBI protects investors and maintains market integrity
• Contact and grievance redressal mechanism

What is SEBI?

The Securities and Exchange Board of India (SEBI) is a regulatory authority that plays a pivotal role in overseeing and regulating the securities and financial markets in India.

Established on 12th April 1988 as a non-statutory regulatory body, SEBI received statutory and autonomous powers on 30th January 1992.Today, SEBI operates as an autonomous body tasked with the responsibility of protecting the interests of investors by ensuring transparency, fairness, and accountability in the securities markets. It enforces rules and regulations that promote ethical conduct among market participants.

Additionally, SEBI ensures the growth and development of India's securities market by introducing reforms, innovative products, and market-friendly regulations. It seeks to maintain market integrity and create a conducive environment for both issuers and investors.

History and formation of SEBI

Securities and Exchange Board of India was first established in 1988 as a non-statutory body through a resolution of the Government of India. It was later granted statutory powers through the SEBI Act, 1992. This marked a significant structural change, giving SEBI legal authority to regulate intermediaries, issue binding regulations, conduct inspections, and enforce compliance. The move followed broader economic reforms initiated in the early 1990s, which aimed to deepen financial markets and improve transparency.

Today, Securities and Exchange Board of India plays a central role in framing regulations, monitoring market conduct, and promoting orderly development of India’s securities markets. Its evolution reflects the growing complexity and scale of the Indian financial system.

Also Read: What is NSE? (National Stock Exchange)

Functions and powers of SEBI

Investor protection: SEBI monitors price rigging, prevents insider trading, promotes fair practices, creates awareness among investors, and prohibits unfair and fraudulent trade practices.

Market development: SEBI facilitates training and education for brokers and investors to promote sound knowledge and wide participation.

Regulatory role: SEBI lays down the guidelines for market players, conducts audits of stock exchanges, and regulates credit rating agencies.

Mutual funds guidelines of SEBI

Here are some key mutual funds guidelines of SEBI:

• A mutual fund sponsor, a group affiliated with an Asset Management Company (AMC), or an AMC associate is restricted from holding 10% or more of the total shareholding and voting rights in either an AMC or any other mutual fund. Additionally, an AMC cannot have representation on the board of another mutual fund.
• Investment by mutual fund schemes cannot be more than 10% of any company’s paid up capital.
• For sectoral or thematic indices, individual stocks are subject to a maximum weightage of 35% within the index. In contrast, other indices are subject to a cap of 25%.
• Concerning the top three constituents of an index, their combined weight should not exceed 65%.
• In the case of an individual index constituent, it must exhibit a trading frequency of at least 80%.
• Each liquid scheme is required to allocate a minimum of 20% of its assets to liquid instruments such as treasury bills, government securities, cash, repo agreements involving government securities, and similar assets.

Important SEBI rules

SEBI has mandated a two-factor authentication system for mutual fund redemptions, including an OTP, to curb fraud. Simultaneously, SEBI has outlined precise guidelines for mutual fund portfolio rebalancing, with corrective actions required within 30 days for deviations from specified asset allocations or such extended period as stated in SEBI Mutual Funds Regulations, 1996. Non-compliance may lead to restrictions on launching new schemes or charging exit loads. For SEBI transparency in disclosure of information and investor protection remain paramount.

Also Read: Bombay Stock Exchange (BSE): Meaning, Benefits and Its Functions

How SEBI protects investors and maintains market integrity

One of SEBI’s key investor protection measures is mandatory disclosure. Companies raising money from the public and mutual fund schemes are required to provide detailed and standardised information. This enables investors to evaluate risks, costs, and structural features before investing, rather than relying on incomplete or promotional communication.

The Securities and Exchange Board of India also regulates and monitors market intermediaries, including stock exchanges, brokers, mutual funds, and distributors. Intermediaries are subject to registration requirements, periodic audits, and ongoing compliance reporting, which are intended to promote adherence to defined conduct standards.

Key mechanisms used by SEBI include:

• Market surveillance systems to detect potential market manipulation, insider trading, and abnormal trading patterns
• Prescribed rules on advertising, disclosures, and selling practices to limit misleading communication
• Enforcement actions, including penalties, suspensions, and regulatory directions where violations are identified

Contact and grievance redressal mechanism

For most securities-related grievances, investors are to first approach the concerned entity directly, such as the listed company, registrar and transfer agent, broker, or mutual fund house. If the response is unsatisfactory or not received within a reasonable timeframe, the complaint may be made through SEBI’s centralised platform.

Securities and Exchange Board of India operates the SCORES (SEBI Complaints Redress System), an online portal that enables investors to lodge and track complaints in a standardised manner. SCORES facilitates communication between investors and the concerned entity, while allowing SEBI to monitor the status and quality of grievance handling.

Also Read: What is Association of Mutual Funds in India (AMFI)? Benefits & Role

Frequently Asked Questions

What is SEBI and why is it important?

SEBI, or the Securities and Exchange Board of India, is the statutory regulator for Indian capital markets. It oversees securities markets, intermediaries, and participants. SEBI’s role is to promote orderly market functioning, ensure transparency, and safeguard investor interests while supporting market development within a regulated and monitored framework.

How does SEBI protect investors?

SEBI strives to protect investors through disclosure norms, conduct regulations, grievance redress mechanisms, and surveillance systems. It mandates transparency in offer documents, scheme information, and ongoing reporting. SEBI also enforces fair practices among intermediaries and provides platforms for investors to lodge complaints, supporting informed decision making and market integrity.

What are the key regulations of SEBI?

Securities and Exchange Board of India regulations cover areas such as market intermediaries, public issues, mutual funds, insider trading, takeover rules, and disclosure requirements, among others. These rules define eligibility, compliance standards, reporting obligations, and governance norms. The objective is to reduce market misuse, enhance transparency, and ensure that participants operate within clearly defined regulatory boundaries.

How does SEBI regulate mutual funds?

Securities and Exchange Board of India regulates mutual funds through detailed guidelines on scheme categories, disclosures, risk classification, expenses, valuation, and investor communication, among others. Asset management companies must follow strict compliance and reporting standards. These regulations aim to ensure transparency, comparison across schemes, and protection of investor interests.

How to file a complaint with SEBI?

Investors may file complaints through SCORES after first taking up the grievance with the concerned entity. The process involves submitting details and supporting documents online. SCORES facilitates communication with the entity and enables SEBI to monitor grievance handling and timelines.

What are the penalties for violating SEBI rules?

Violations of SEBI regulations may attract monetary penalties, suspension or cancellation of registration, regulatory directions, or legal action. The severity of the penalty depends on the nature and extent of non-compliance. SEBI may also issue warnings or corrective directions. These measures aim to deter misconduct and maintain fairness, transparency, and discipline in Indian capital markets.