What is the role of SEBI in stock market regulation | Motilal Oswal
What is the role of SEBI in stock market regulation | Motilal Oswal

How does SEBI Regulate the Stock Market

The Indian Capital Markets are efficiently regulated and tracked by The Securities and Exchange Board of India (SEBI), The Reserve Bank of India and the Ministry of Finance. The Ministry of Finance operates via the Department of Economic Affairs (Capital Markets Division). The role of the division is to formulate policies for organized policy development of securities markets. In particular, the division works to safeguard the interests of traders and investors trading in the stock market of India. 

SEBI Regulations

The Capital Markets Division of the Department of Economic Affairs sees to the administration of rules made within the bounds of the Securities and Exchange Board of India Act of 1992. This is the act that established the Securities and Exchange board of India, or SEBI, the main authorised regulatory body that regulates Indian stock exchanges. The key function of SEBI is to keep the interest of investors/traders protected. 

SEBI’s Role

While trading in the Indian stock market, investors and traders have to execute trades while abiding by rules. This is to promote fairness. SEBI’s role is to carry out functions that meet with the tenets of SEBI regulations and these functions include the following: 

  • SEBI regulates Capital Markets through certain measures it takes.
  • Protects the interests of traders and investors, thereby, promoting fairness in the stock exchange.
  • SEBI regulates how the security markets and stock exchanges function.
  • SEBI regulates how transfer agents, stock brokers and merchant bankers, etc, function. 
  • SEBI handles the registration activity of new brokers, financial advisors, etc. 
  • SEBI encourages the formation of Self-regulatory Organizations.
  • SEBI promotes investor learning opportunities.
  • SEBI makes rules to prevent malpractice.
  • SEBI manages and controls a ‘complaints’ division. 

The Decisions of SEBI

The Indian stock market would be a hapless place without the regulations enforced by SEBI. With this in view, SEBI has been responsible for taking several steps to ensure the seamless operation of stock markets in India: 

  • Determination of Stock Pricing - In a recent SEBI announcement, all companies listed have been given permission to decide their own share prices, plus a premium over and above this. 
  • No Insider Trading - One of the main loopholes in the Capital Markets of India was ‘insider trading’. SEBI has abolished this practice which gives certain traders unfair advantages over others. 
  • Regulation of Mutual Funds - SEBI regulates control over mutual funds, both of the government and private sector. 

Trade with the Best

In your quest to become a successful trader, you must familiarize yourself with the rules of SEBI. You can do this by trading with Motilal Oswal, making profits by playing by the rules. 

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