Role of the SEBI (Securities Exchange Board of India) for Investors

Investors are the backbone of the financial market. They put their money in the market in the form of stocks and mutual funds to gain profit. For example, you are an investor and want to invest your money in financial markets. However, investing money in an unstable market makes your investment risky.

This is where SEBI which was constituted in 1988 and was established as a regulator in 1992 comes in. The board was created by the central government and is governed by the SEBI Act, of 1992. SEBI works as a regulator and regulates the market and makes sure that the listed companies on the stock exchanges follow all the guidelines and norms laid down. They also make rules from time to time which promotes market stability protecting your money.  SEBI ensures a proper and regularised stock market with its laws and regulations 

In this blog, we have discussed the SEBI Act 1992, along with the prime role SEBI plays in safeguarding investor’s interests. Also, know about the measures taken by the board to regularise the market. Know the complete details about SCORES and much more in this blog.

What is Investor’s Interest?

Investor’s interest is a very simple term and it means an investor’s well-being in the security market. This includes offering fraud protection and curbing malpractices within the market. Safeguarding investors’ interests is very important for SEBI as it increases their confidence in the system. It also helps to maintain the market’s integrity.

SEBI Act 1992 

The SEBI Act 1992 was released by the Indian government to regularise the financial market. The act promotes an investor’s interest and protects their investment. This law considers SEBI as a statutory body and enables it to make laws to protect investors’ interests. This act ensures that SEBI regularises the working of financial companies. SEBI Act, 1992 also enables the board to regulate the market and prevent insider trading and dispute resolution.

Role of SEBI for Investors

Refer to the section below to get the complete details about the prime role that SEBI plays for investors.

1. Investor Protection

The major role of SEBI is to protect and safeguard investor’s interests. The board imposes strict rules and norms to regularise trading companies and listed companies. This also prevents insider trading and market manipulation in the market. SEBI also conducts workshops from time to time to educate investors about fraud.

2. Market Development

SEBI plays a huge role in developing the security market of India. They introduce new financial instruments, regularise foreign investment and promote financial literacy. All of these factors contribute to high liquidity within the market fostering economic growth.

3. Regulatory Oversight

Regular inspections and checks of the SEBI increase investors’ trust and confidence in the security market. The inspection means registering new companies, regulating existing companies and designing rules and regulations that help to keep market activities in check.

4. IEPF

The Investor Education and Protection Fund (IEPF) is a regulatory mechanism. For the administration of the Investor Education and Protection Fund Government of India on 7th September 2016 established the Investor Education and Protection Fund under the provisions of section 125 of the Companies Act, 2013.No direct regulation of the IEPF is carried out by the SEBI. Nonetheless, in line with the goals of the IEPF, SEBI does have a role to play in defending investors and encouraging investor education. Its primary objective is to safeguard the interests of investors by claiming unpaid dividends, share redemption proceeds, and matured deposits. The IEPF mandates companies to transfer unclaimed funds to the fund. Investors can subsequently file claims to recover their rightful dues through the prescribed process.

Meaning of SCORES and Implication for Investors

The SEBI Complaints Redressal System is referred to as SCORES. Investors can utilize this system, developed by the Securities and Exchange Board of India (SEBI), to register and monitor complaints against listed firms, intermediaries (brokers, depositories, etc.), and mutual fund institutions.

Role of SEBI in Developing Secured Financial Market

The role of SEBI for investors is very diverse and it ensures that a fair and transparent market exists. Read on to learn about the role that SEBI plays in developing a secured financial market.

1. Securing Financial Market

SEBI safeguards the financial market through robust regulation and investor protection. It does this by keeping a check on financial companies through its norms that help prevent fraud and promote fair trading. SEBI’s role in maintaining market integrity fosters investor confidence and contributes to the overall stability of the financial system.

2. Market Infrastructure Development

Another crucial role that SEBI plays in safeguarding investor’s interests is by creating a robust market infrastructure. The board ensures efficient and secured market operations by developing trading platforms and depositories. All of this contributes to a streamlined process that reduces operational risk and increases the market’s integrity. 

3. Regulation of Companies

SEBI plays a major role in regulating listed companies operating in the country. For this, they come up with regulations for these companies, investment advisors, and mutual fund distributors. The board also conducts regular inspections and audits which helps them to protect investor’s interests.

4. Promoting Market Transparency

SEBI is known to elevate market transparency which safeguards investors’ interests. For this, the board imposes timely norms and also goes for standardised financial reporting. This offers essential data to investors that can be used by investors to make informed decisions. 

5. Fostering Market Development

SEBI plays a major role in developing the securities market. This is done by introducing new financial instruments, encouraging foreign investment, and promoting financial literacy. These initiatives then enhance liquidity and provide diverse investment factors for investors. 

Conclusion

Concluding, SEBI plays a very important role in maintaining the integrity of the market. It does this by keeping the market in check, and following safety measures to prevent fraud. The SEBI Act of 1992 offers the necessary framework that ensures market transparency and development. With its regulatory measures, SEBI also promotes fair and secure trading practices thus maintaining a stable financial market. 

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Disclaimer – This article is for educational purposes only and does not intend to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.