SEBI — its establishment, structure, board of directors, and key functions,
SEBI in India: Meaning, Establishment, Structure, Board of Directors & Functions (Explained in Simple Terms)
The SEBI, or Securities & Exchange Board of India, is one of the most crucial bodies in the Indian financial system. And if you have ever been curious about who looks after the stock market in India or how the interests of investors are protected in the Indian stock market, then the SEBI is the answer.
This one-stop blog post explains in detail how SEBI was formed, the organisational structure of SEBI, the SEBI Board Composition, and its roles and functions, all of which are explained in simple English.
1. What Is SEBI? A Simple Introduction
The Securities and Exchange Board of India is the institution that manages and regulates the securities market in India. It regulates stock exchanges, stock brokers, mutual funds, listed companies, and other market intermediaries. All the above institutions are under the Securities and Exchange Board.
In fact, one can imagine the SEBI as a “watchdog” over the Indian capital market. An entity that assumes charge of the protection of the investors as well as the efficient functioning of the financial market itself is this organisation. (Securities and Exchange Board of India)
2. Why Was SEBI Established? The Background Story
Before the establishment of SEBI, there was no robust independent regulatory authority in India’s capital markets. The Controller of Capital Issues was the de facto regulator, with old laws constraining it to enforce market discipline.
This led to a number of irregularities and frauds in the market during the 1970s and 1980s because of the lack of a strong regulator. With a growth in Indian markets, there arose a requirement for a statutory regulator that could:
protect investors
regulate market participants
to prevent fraud or market manipulation
promote healthy and transparent market development
To address the need for such a body, the SEBI was first formed as a non-statutory authority through a Government of India decision on April 12, 1988. (Securities and Exchange Board of India)
Though it did not possess full legal powers at the beginning. It received legally recognised status on 30th January 1992, with the commencement of the Securities and Exchange Board of India Act of 1992. This action enabled SEBI to become a fully legalised body with the capability of implementing regulations, investigating offences, and even levying. (Securities and Exchange Board of India)
Since the SEBI Act, SEBI has played a pivotal role in developing India’s modern capital market.
3. Establishment and Legal Foundations
In the history of the creation of SEBI, there are two major periods:
Phase 1 – Non-Statutory Body (1988
SEBI was created as a non-statutory body in 1988. It was an advisory body with limited powers, and this marked a historical step forward towards a formal market regulatory mechanism in India.
Phase 2 – Statutory Status (1992)
Following the Harshad Mehta scandal that undermined market confidence and exposed certain weaknesses in market regulation, the SEBI Act of 1992 was enacted by Parliament. This gave SEBI the following statutory powers:
promulgate and enforce regulations
make market research
punish violations, ensure compliance within the overall securities market ecosystem (Samco). In line with this Act, SEBI has the authority to control the securities market in India, right from stock exchanges to middlemen such as brokers, mutual funds, and even bankers, among others.
The journey of SEBI’s establishment can be divided into two key phases:
Phase 1 – Non-Statutory Body (1988)
In 1988, SEBI was formed as a non-statutory agency. It was an advisory body with limited powers but marked the beginning of formal market regulation in India. (Securities and Exchange Board of India)
Phase 2 – Statutory Status (1992)
After the Harshad Mehta scam shook investor confidence and highlighted serious gaps in market governance, Parliament passed the SEBI Act, 1992. This provided SEBI with statutory powers to:
- draft and enforce regulations
- conduct market investigations
- penalise violations
- ensure compliance across the securities market ecosystem (Samco)
As per the Act, SEBI is empowered to regulate the securities market in India — from stock exchanges to intermediaries like brokers, mutual funds, bankers, and more.
4. SEBI’s Organisational Structure
The structure of the SEBI aims at balance, expertise, and independence. The regulator falls under the administrative control of the Government of India’s Ministry of Finance; however, it works in an autonomous way to make decisions that are impartial. (Wikipedia)
The core organisational setup consists of:
Head Office and Regional Offices
Headquarters: Sebi is headquartered at the Bandra Kurla Complex in Mumbai. (Wikipedia)
The company also has regional offices in key cities, including New Delhi, Kolkata, Chennai, and Ahmedabad. (Aditya Birla Capital)
Local Offices: SEBI also has local offices in other metropolises such as Bangalore, Jaipur, and Chandigarh, among others. (Aditya Birla Capital)
This geographic reach helps SEBI to keep in touch with regional markets and the market participants throughout India.
Departments and Divisions
Organisationally, SEBI has various frontline departments dealing with regulation, development, enforcement, and oversight of different segments of the markets. Some of these important departments are:
Corporate Finance Department
Economic & Policy Analysis
HRD
Legal Affairs & Enforcement
Investment Management
Debt & Hybrid Securities
Foreign Portfolio Investors & Custodians Technology & Information Systems (PW Live) Each department gives priority to various critical functions that are necessary for SEBI to regulate various aspects of the securities market.
5. SEBI’s Board of Directors — Who Runs SEBI?
At the helm of the organisational structure of SEBI is the Board of Directors, which is regarded as the principal authority for policy formulation and decision-making at SEBI.
The composition of the Board has been specified by the SEBI Act, 1992. The Board generally consists of:
• The Chairman
Appointed by the Central Government of India.
The Chairman heads the Board and also represents SEBI in major national and international settings. (Prepp)
→ Ministry of Finance Representatives
There are two nominations from the Union Ministry of Finance.
They offer insights based on India’s financial policy approach. (Prepp)
✔ Reserve Bank of India Nominee
The members include one appointed by the Reserve Bank of India (RBI), which ensures that this member aligns with broader financial objectives. (Prepp) ✔ Other government-nominated members. There are also five additional members nominated by the Central Government of India. These might include those with expertise in law, finance, economics, and security markets. (Prepp) On the whole, the Board generally comprises nine members, thereby providing varied experience from the governmental sector, central bank, legal, and financial sectors. They are primarily responsible for governing the policies at SEBI, ensuring that the regulated body performs its tasks effectively. (Prepp)
6. How the Board Functions
The Board meets periodically to:
- Discuss and approve regulatory policies
- Guide the long-term strategy of SEBI
- Review market developments and challenges
- Oversee the implementation of laws and market regulations
- Provide direction for enforcement and compliance actions
Board decisions play a major role in shaping India’s securities market rules and frameworks.
7. Key Functions of SEBI
SEBI performs a wide range of functions that can be grouped under regulatory, protective, and developmental roles. Each area contributes to market stability and investor welfare.
1. Regulatory Function
All the major players in the securities market are regulated by the SEBI. The duties and powers of the SEBI include the following
Granting licenses and regulating market intermediaries such as brokers, merchant bankers, and investment advisors
Stock exchange and clearing corporations Regulation
Establishing listing requirements for other firms
Establishing disclosure requirements for other firms
Establishing
Creating code of conduct/ethical standards for participants of the marketplace (PW Live)
2. Protective Functions
The protection of investors’ interests is one of SEBI’s core concerns.
SEBI protects the investor’s rights in several ways
Protection against fraudulent trading and market manipulation
Monitoring insider trading activities and price manipulation
Ensuring the Enforcement of Transparency and Fair Disclosure by Listed Corporations Carrying out market inquiries and fining contraventions (PW Live)
3. Developmental Functions
EBI is also contributing to the development of the securities markets:
Introduction to Electronic Trading Systems and Dematerialisation of Securities
Enhancing the investors’ consciousness on personal finance
Promote the establishment of new financial products/instruments.
Facilitating reforms such as T+2 settlement cycles, regulations on mutual funds, and corporate governance regulations, among others (Samco)
The above efforts have contributed towards making the markets of India among the most technology-advanced and investor-friendly in the world.
8. Why SEBI Matters to Investors and Markets
The reason being SEBI plays a very important role.
Investor Protection: SEBI ensures that dispensation to small and large investors is conducted in a single window with due access to transparent information.
Market Integrity: SEBI provides more confidence to the financial markets by imposing strict rules.
Principle of open and fair competition: There should be an equitable regulatory environment for all participants in the market so that genuine competition can be created.
Market Development: SEBI’s developmental initiatives provide the means for innovation, harnessing and expansion to take place within the financial markets.
Be it the retail investor, the corporate issuer, or the financial professional, SEBI forms and shapes the way the Indian securities market functions day in and day out.
9. Conclusion — SEBI’s Central Role in India’s Financial System
Conclusion:
SEBI is more than a regulatory body in India; it is the backbone of trust, transparency, fairness, and innovation in the Indian securities market. SEBI’s transformation from a non-statutory body in 1988 to the strong statutory body it is currently is indicative of India’s focus on proper financial regulation.
Knowing about the formation, structure, board, and functions of SEBI will assist you in comprehending the smooth running of the Indian markets.
If you are interested in entering the stock market with confidence, one very informative place to begin your education would be with SEBI.
