Page 4 - Lesson Note 4

The glaring examples of these malpractices include existence of self – styled merchant bankers

unofficial private placements, rigging of prices, unofficial premium on new issues, non

adherence of provisions of the Companies Act, violation of rules and regulations of stock

exchanges and listing requirements, delay in delivery of shares etc.

These malpractices and unfair trading practices have eroded investor confidence and multiplied
investor grievances. The Government and the stock exchanges were rather helpless in

redressing the investor’s problems because of lack of proper penal provisions in the existing

legislation. In view of the above, the Government of India decided to set-up a separate
regulatory body known as Securities and Exchange Board of India.

Purpose and Role of SEBI

The basic purpose of SEBI is to create an environment to facilitate efficient mobilization and

allocation of resources through the securities markets. It also aims to stimulate competition

and encourage innovation. This environment includes rules and regulations, institutions and

their interrelationships, instruments, practices, infrastructure and policy framework. This

environment aims at meeting the needs of the three groups which basically constitute the
market, viz, the issuers of securities (Companies), the investors and the market intermediaries.

• To the issuers, it aims to provide a market place in which they can confidently look forward

to raising finances they need in an easy, fair and efficient manner.

• To the investors, it should provide protection of their rights and interests through adequate,

accurate and authentic information and disclosure of information on a continuous basis.

• To the intermediaries, it should offer a competitive, professionalized and expanding market
with adequate and efficient infrastructure so that they are able to render better service to the

investors and issuers.

Objectives of SEBI The overall objective of SEBI is to protect the interests of investors and to

promote the development of, and regulate the securities market. This may be elaborated as

follows: