Monday , 6 December 2021
Breaking News

What is SEBI? Is it important for investors to understand its working?

The Securities and Exchange Board of India (SEBI) was established in 1988 and bestowed with statutory powers in 1992. It was brought in to carry out the role of a market regulator in the Indian financial market at a time when the malpractices of operators were rampant.

Purpose: With its statutory power, it got the autonomy to control and regulate the activities of the country’s stock exchanges. It does so to ensure the functioning of the securities market in an orderly manner and protect the interests of investors, all the while keeping a sharp eye on the market for malpractices.


  • SEBI is empowered to approve and regulate the by-laws of the stock exchanges.
  • It can demand an inspection of the books of accounts of any recognized Indian stock exchange and seek periodical returns from such stock exchanges.
  • It can also scrutinize the books and official records maintained by financial intermediaries.
  • It can control and monitor the registration of stockbrokers.
  • It can bar any company from getting listed in a stock exchange.

How does it affect investors?

SEBI ensures overall transparency in the securities market through its judgments against unethical practices in the market. It also takes legal action against violators. However, an investor is directly affected by the rules and regulations that SEBI frames to safeguard them.

For instance, SEBI doesn’t allow any mutual fund scheme to give more than 25% of its investments to a single stock (35% in the case of sectoral or thematic schemes). This addresses the market risk of the investors and also the risk of manipulation in mutual funds.

Investor protection measures

SEBI has an Investor Education and Protection Fund established, which collects all unclaimed fund dividends, matured deposits, share application money, etc., from companies that have been operating for seven or more years.

It has an Investor Protection Fund to safeguard investors from defaults by brokers. It has also initiated a methodology to simplify and speed up the process of transfer and allotment of shares. SEBI registered mutual funds in India are regulated through the Association of Mutual Funds of India (AMFI). Thus, mutual fund investors are protected from unfair investment practices through the AMFI.

Investors and SEBI functions

As an alert investor, you should be aware of the various circulars and pronouncements of SEBI. If such statements relate to your investments, you should pay close attention to what SEBI has to say on the same. Do note that SEBI regularly updates statutes and regulations related to the securities market.

Given the influence of SEBI in the Indian financial market and the relevance of its steps for investors, you should have a fair idea of SEBI and its activities. The authority of SEBI is not just limited to equity investors but also mutual funds.


When it comes to investing in mutual funds, the Tata Capital Moneyfy App is a user-friendly platform. Moneyfy App is equally popular among new as well as experienced investors for the tech-enabled investment experience it provides.