This article has been written by Aditya Jain

Securities and Exchange Board of India was established on 12th April  1988 for the regulation of the securities market as a non-statutory establishment and it derived statutory powers on 30th January 1992 from the Securities and Exchange Board of India  Act 1992 and then became an independent body.  Its head office is in Mumbai and regional zonal offices are in New Delhi , Ahmedabad, Kolkata and Chennai. Securities and Exchange Board of India  has  local offices at Jaipur, Bangalore, Guwahati, Patna, Bhubaneshwar, Kochi and also at Chandigarh.

The organisation structure of the Securities and Exchange Board of India  consists of 9 members which comprises of  a chairman who is selected by the Union Government of India, 2 officers from the Ministry of Finance, 1 member from the Reserve Bank of India and five members who are elected by the Union Government of India .

The current chairman of Securities and Exchange Board of India  is Madhabi Puri Buch who took charge as the chairman on 1 March 2022 and Madhabi Puri Buch is the first woman to be appointed as the chairperson of Securities and Exchange Board of India.

Meaning of a Stock Exchange

Stock exchange is a systematized marketplace which works as an enabler of the transactions and aids the purchasing and the selling of shares in addition to other securities.

That is to say, stock exchange  is a platform that conducts the trading of financial instruments like stocks and derivatives. The happenings on the  stock exchange in India are controlled by Securities and Exchange Board of India . Transactions in the stock exchange consists of issuance of shares and securities by companies, brokering etc.

Role of Securities and Exchange Board of India 

• The chief objective of the Securities and Exchange Board of India  is to oversee the rules and protocols to keep an eye on the misuses and frauds
• Securities and Exchange Board of India  aids in the protection of the interest of investors .
• Securities and Exchange Board of India  is set up to protect the needs of mainly three groups

• Issuers: Securities and Exchange Board of India makes available to the issuers a market for raising funds.
• Investors: Securities and Exchange Board of India offers protection of the rights and interests of the investors and makes available significant data on a continuous basis.
• Intermediaries: Securities and Exchange Board of India works as a linkage among the issuers and the investors and makes available competitive markets to the intermediaries so that intermediaries are capable of rendering improved services.

Functions of Securities and Exchange Board of India 

• Securities and Exchange Board of India  controls the misuses and fraudulent dealings in the securities marketplace
• Securities and Exchange Board of India   handles the registering of the brokers in addition to sub-brokers.
• Securities and Exchange Board of India   is the controller of the insider trading and it also levies penalties for such kind of actions.
•  Securities and Exchange Board of India aids in making available flexibility in the workings of the capital marketplace.
• Securities and Exchange Board of India  encourages investors education in addition to the training of intermediaries to prevent any type of fraud.

Powers of Securities and Exchange Board of India 

• Securities and Exchange Board of India  has the authority to make and control the regulations of the stock exchanges.
• Securities and Exchange Board of India  has the authority to examine the books of accounts and call for the periodical returns of the recognized stock exchanges 
• Securities and Exchange Board of India  has authority to examine documents and books of accounts of the financial intermediaries.
• Securities and Exchange Board of India  has power to inspect any document witness under security commission to control any fraudulent activity.

Hindustan Unilever limited vs Securities and Exchange Board of India 

Hindustan Unilever Vs SEBI is one of the recognized insider trading cases and quite a lot of changes were made after the verdict. It is among the recognized breakthrough case related to insider trading. The matter is related to Hindustan Unilever purchasing 8,00,000 Brook Bond shares, 2 weeks earlier of the merger being formally revealed (Hindustan Unilever and Brook Bond). March 25, 1996 was the day when this transaction happened, just approximately 25 days earlier from the merger of HLL-BBLIL which was declared on April 19, 1996. Later, approximately 15 months of examining insider trading charges, a show cause notice was delivered to all Executive Directors, Chairman, Company Secretary, then-Chairman of HLL in the month of August 1997 by the Securities and Exchange Board of India. Far ahead that year, in the month of March 1998, Securities and Exchange Board of India prosecuted Hindustan Unilever for insider trading. Securities and Exchange Board of India  instructed Hindustan Unilever to pay compensation to United Trust of India, and five common directors of Hindustan Unilever and Brook Bond were accused of criminal misconducts. 

Appellate Authority grounded its decision on “previous market awareness of the transaction” as shown by the press reports. Nevertheless, the firm admits that only some reports were issued before the real procurement. The Authority quoted 21 news matters to back its claim that the probability of the merger was very well recognized. 

In the ruling, Appellate Authority held that Securities and Exchange Board of India was not competent of starting investigations and then by means of the powers of the Act to pay compensation deprived of first issuance of order under the Regulation 11B. It was also held that the standards of Section 2(k) of the  Regulations of 1992 were too not satisfied. Appellate Authority also held the information to be priced sensitive but then again not unpublished.

Case of Sahara vs Securities and Exchange Board of India 

There remains no hesitation that this verdict aided as a yardstick in Indian company terrain as this verdict not just provided Securities and Exchange Board of India with the authority of investigation and judgement in the listed companies’ matters but then also approves the authority to inspect in matters of the unlisted companies. It bestowed Securities and Exchange Board of India with the authority to examine any matter relating to the investors’ interest even in case it relates to unlisted companies. 

It also clears the important points of law as well as gets rid of the uncertainties associated to the issue of securities by unlisted companies who continued taking benefit by raising enormous funds in name of investments from public who remained uninformed of the dangers tangled in such investments. One more productive thing of the verdict is that it linked the gap that was between Securities and Exchange Board of India and the Ministry of Corporate Affairs. This helped as respite for the reason that in the past numerous parties had taken benefit of this gap. The stance taken by Securities and Exchange Board of India in this matter concerning the safety of investors is extremely admirable.

Conclusion

It is settled that stock market remains a significant tool for the financial development of the nation.  Before the creation of Securities and Exchange Board of India  public was investing a smaller amount in the stock market since their confidence was missing owing to discriminating practices in the stock market. In order to reclaim the trust of the people in the stock market, the government  established the Securities and Exchange Board of India in order to monitor and control the happenings of the stock market.

References:

• https://www.ijlsi.com/wp-content/uploads/An-Analysis-of-the-HUL-vs.-SEBI-Case-and-the-Changing-face-of-Insider-Trading-Pre-and-Post-Covid.pdf
• https://www.legalserviceindia.com/legal/article-5983-sebi-and-its-power-to-regulate-issue-and-transfer-of-securities-under-companies-act-2013.html#:~:text=Sebi%20provides%20regulation%20to%20issue,or%20those%20companies%20which%20are
• https://legaldesire.com/sahara-india-real-estate-corporation-ltd-ors-vs-securities-exchange-board-of-india-sebi-anr/
• https://www.indiatimes.com/worth/investment/how-many-stock-exchanges-are-there-in-india-563154.html

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