Securities and Exchange Board of India (SEBI) is now powerful. SEBI oversees India’s financial system. SEBI controls securities markets non-statutorily. Indian Parliament given it autonomy and statutory powers with the SEBI Act 1992.
The SEBI is intended to implement the Indian regulatory paradigm, which entrusts securities market oversight to a single, highly visible, independent, statute-backed, Parliament-accountable, and investor-trusted body. Let’s have a look on transformation of SEBI over the years.
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SEBI Transformation over the Years
Economic expansion required a vibrant securities market throughout the 1980s and 1990s. Allocating investible funds through the securities market increases real savings, capital formation, and investment productivity from a given national income.
Quality determines. Since the early 1990s, a package of securities market reforms has liberalized, regulated, and developed the Indian market to promote quality, efficiency, transparency, fair trade, and international standards. Why did liberalization, regulation, and development come together? Let’s understand about SEBI’s Transformation further.
Why Liberalization?
The few factors for the need for Liberalization are as follows:
- Securities market liberalization boosts economic growth.
- Interventions in the securities market initially helped governments expropriate much of the sovereign age and control and divert revenues for desired uses.
- Liberalization inexpensively tapped government savings.
- Competing enterprises received securities market funding under government terms.
- Good projects lost resources.
- Capital accumulation was pointless when some investments had negative returns and others had tremendous yields.
- This decreased the average investment return, making it less ideal given the cost of saves. Thus, resource allocation barriers must be removed.
Why Regulation?
Our laws define “securities” broadly. “Securities” include shares, bonds, debentures, CIS units, etc. It lacks “security” elements.
- No other jurisdiction considers “securities” components. “Securities” are most insecure. Unregulated markets for unstable instruments collapse.
- Market defects cause suboptimal outcomes and market failures. Without specialized agency regulation, market players would conduct due diligence before transacting.
- High social costs.
- Regulated quality improves market confidence. Due to asymmetric knowledge, risk-averse investors may abandon the market without basic requirements. Market implodes.
- Restriction hinders liberalization. Market participants think liberalisation means removing all laws and conventions. It involves replacing one set of codes/statutes with a more liberal set that provides economic actors full freedom but influences or prescribes how they should act to make liberalized markets efficient and fair and reduce systemic failure.
- To minimize overregulation and ensure proper regulation design and execution, recall the paradox. Otherwise, regulation costs would exceed benefits.
Why Development?
Market development requires regulation. Chicken-egg problem. Regulation develops markets and regulates them. Thus, many reforms combine regulation and development. A general economic and political development agenda includes various developmental metrics.
Interest rate, pricing, and other macroeconomic policies can boost securities market growth. Other market efficiency and transparency-boosting initiatives include a trustworthy payment system and clearing mechanism, standardized accounting, effective corporate governance, skilled labour, and more.
Regulations of SEBI
Below are the SEBI Regulations:
- SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015- These laws aim to align listing agreement terms with the Companies Act, 2013 and combine securities listing agreement conditions into one regulation.
- SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 – These regulations address capital and disclosure issues for listed businesses in India to make securities trading smooth and advantageous for both corporations and investors.
- SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 – SEBI created these policies to address legal and fair share acquisitions and takeovers.
- SEBI (Prohibition of Insider Trading) Regulations, 2015 – This law repeals the 1992 SEBI (Prohibition of Insider Trading) Regulations. This law strengthens India’s legal environment for flawless and fair securities trading by outlawing insider trading.
- SEBI (Depositories and Participants) Regulations, 2018 – On October 3, 2018, SEBI issued the SEBI (Depositories and Participants) Regulations, 2018 (‘New DP Regulations’), replacing the 1996 version and amending depositories’ structuring, shareholding, and governance.
- SEBI (Buyback of Securities) Regulations, 2018 – SEBI reviewed the SEBI (Buyback of Securities) Regulations, 1998 to simplify the language, remove redundant provisions and inconsistencies, and update references to the new Companies Act, 2013 and other new SEBI Regulations.
- Equity Listing Agreement – This listing agreement’s terms (including modifications) mostly address listed companies’ mandatory compliance with India’s registered stock exchanges.
Recent SEBI Initiatives
Several SEBI Initiatives are as follows:
- Margins and securities lending.
- Liquidity should increase.
- Auctions are also gone.
- Clearing corporations/houses can borrow securities to settle without auctions.
- No settlement short delivery.
- NSDL will build and manage a securities market participant and professional registry. This would aid market surveillance.
- We just established the Central Listing Authority to dynamically list requirements and issue trading platform gate passes.
- We are designating an ombudsman to quickly resolve investor complaints.
- Institutional investors have limited securities STP. T+2 rolling settlement is market wide.
- We now offer interest rate derivatives, corporate debt securities, and retail government securities on exchanges.
- Disclosure and corporate governance have greatly improved.
Deserts – Road Ahead
The Securities and Exchange Board of India (SEBI) works closely with the regulated and government to safeguard investors and improve market efficiency and transparency.
The goal is to make SEBI the most innovative and respected regulatory organization in the world and make the Indian securities market an example for other markets. SEBI’s latest projects are:
- Create a national institute to train securities market specialists.
- We are also developing a nationwide accreditation to ensure that any person or agent working with a market intermediary has the knowledge and skills to provide competent intermediation.
- Corporatize and demutualize exchanges to avoid conflicts of interest.
- Implement market-wide trade initiation-to-settlement straight through processing.
- Move to T+1 rolling settlement.
- Improve accounting standards, disclosures, and corporate governance for investors.
- Update regulations to reflect market changes. example. Launch new items to fulfil all market needs.
Takeaway
SEBI will keep improving the securities market to match changing conditions. SEBI will do so because it believes the securities market permits people to do more with their savings and ideas and abilities than otherwise conceivable. SEBI would ensure that every citizen participates in the securities market and benefits from it.
