Powers of SEBI:

Important Powers assigned to SEBI are as explained below:

(1) Powers relating to stock exchanges and intermediaries: SEBI has wide powers regarding the stock exchanges and intermediaries dealing in securities. It can ask information from the stock exchanges and intermediaries regarding their business transactions for inspection/scrutiny and other purposes.

(2) Powers relating to monetary penalties: SEBI has been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violations. It can even impose suspension of their registration for a short period.

(3) Powers to initiate actions relating to functions assigned: SEBI has a power to initiate actions in regard to functions assigned.

For example, it can issue guidelines to different intermediaries or can introduce specific rules for the protection of interests of investors.

(4) Powers relating to insider trading: SEBI has power to regulate insider trading or can regulate the functions of merchant bankers.

(5) Powers under Securities Contracts (Regulation) ACT: For effective regulation of stock exchanges, the Ministry of Finance issued a Notification on 13 September, 1994 delegating several of its powers under the Securities Contracts (Regulation) Act of SEBI. SEBI is also empowered by the Finance Ministry to nominate three members on the Governing Body of every stock exchange instead of earlier practice of government making such nominations.

(6) Powers to regulate business of stock exchanges: SEBI is empowered to regulate the business of stock exchanges, intermediaries associated with the securities market as well as mutual funds, fraudulent and unfair trade practices relating to securities and regulation of acquisition of shares and takeovers of companies.

Achievements of SEBI:

Important Achievements of SEBI are as explained below:

(1) Guidelines to Issuing Companies: The SEBI had issued detailed guidelines for all companies – old as well as new – for disclosure of information and protection of the interests of investors. The guidelines relate to first issue of new companies, first issue by existing companies, issue of convertible debentures, etc. The guidelines are i addition to other legal provisions in existence.

After the abolition of the post of CCI, conpabies werew allowed to approach the capital markets without prior government permission subject to getting their offer documents cleared by SEBI. In other words, SEBI was given the power to

control and regulate the new issue market as well as the old issues market i.e. stock exchange.

SEBI has introduced a code of advertisement for public issues for ensuring fair and truthful disclosures. SEBI has also made underwriting of issue optional subject to certain conditions. The purpose is to reduce the cost of issue.

The purpose behind issuing these guidelines is to give protection to small investors and avoid their exploitation due to misleading information.

(2) Regulation of Portfolio Management Services: The highly infringed portfolio management services (PMS) were placed under the regulation of SEBI since January 11, 1993. This is the fourth financial activity to be brought under SEBI’s control, the previous ones being stockbrokers and sub-brokers, merchant banking and insider trading. The violations of the PMS scheme and similar schemes offered by various banks and merchant banking subsidiaries had come to light during the securities scam. The Janakiraman Committee had highlighted such blatant misuse in its report published on August 26, 1992. The SEBI regulations evidently have been framed keeping the securities scam in mind.

(3) Regulation of Mutual Funds: The Mutual Fundfs were placed under SEBI control on January 20, 1993. Next to portfolio management services, it is the fifth financial activity to be brought under SEBI’s regulatory framework. Mutual funds have been barred from indulging in option trading, short selling or carrying forward transactions in securities. Permission has been granted to invest only in transferable securities in the money/capital market. Registration would be henceforth granted only to those mutual funds who can prove their efficiency and conduct business in an orderly manner, as stipulated by SEBI. These regulatory measures will improve the working of mutual funds and take them on healthy lines. This is one area where SEBI is playing a positive role.

(4) Action for Delays in Transfers and Refunds: SEBI has prosecuted many companies for delaying share transfers and for delay in refund of public issue money. This step gives protection to investors and avoids their exploitation through delayed payments.

(5) Issue of guidelines to intermediaries: In 1991, the Narasimham Committee made certain recommendations relating to capital market. It suggested that SEBI should formulate a new set of guidelines to protect investors. By issuing different types of guidelines, the SEBI has executed this recommendation of the Committee and have issued guidelines to intermediaries. Such guidelines will give protection to investors and will also control unfair practices of intermediaries operating on securities market. This is an example of positive role of SEBI.

(6) Guidelines on Takeovers and Mergers: SEBI has issued guidelines as regards takeovers and mergers. The purpose is to ensure transparency in acquisition of shares, fair and truthful disclosure through public announcement and avoidance of unfair practices in

takeovers and mergers. The guidelines issued by SEBI are for the protection of the interest of small investors.

(7) Special Measures for Protection of Investors: SEBI has placed special emphasis on investor protection, especially by insisting that issuers of capital and associated market intermediaries provide full and fair information to prospective investors, registration of market intermediaries and inquiring into investor complaints. This is a move in the right direction. As a result, the market intermediaries will come under effective supervision and control of SEBI in the near future.

(8) Education and Guidance of Investors: SEBI has brought out number of publications for the education and guidance of investors’ Grievances – Rights and Remedies, Merchant Bankers – Rules and Regulations, SEBI Act – 1992, SEBI Market Review and SEBI News letter.

(9) Orderly Functioning of Stock Exchanges: SEBI is working for broadening the membership of stock exchanges, shortening settlement periods, improving transparency of transactions, promoting professionalism among brokers and encouraging the stock exchanges to computerise their functions.

The Measures noted above are for healthy growth of Indian stock exchanges. These measures are likely to strengthen the functioning of stock exchanges in India.

(10) Control on Merchant Banking: Merchant banking has been statutorily brought under the regulatory framework of SEBI Merchant bankers are now to be authorised by SEBI. They have to adopt the stipulated capital adequacy norms, abide by the code of conduct which specifies a high degree of responsibility towards investors in respect of pricing and premium fixation of issues and disclosures in the prospectus. Merchant bankers have now a greater degree of accountability in the offer document and issue process.