• The Centre agreed to the Supreme Court’s proposal to set up a panel of experts to look into strengthening the regulatory mechanisms for the stock market in the wake of the recent Adani group shares crash triggered by Hindenburg Research’s allegations.

• Saying it has no objection to constituting the panel, the Centre stressed that market regulator Securities and Exchange Board of India (SEBI) and other statutory bodies are fully equipped, not only regime wise, but otherwise also to deal with the situation.

• The Supreme Court had earlier said the interests of Indian investors need to be protected against market volatility in the backdrop of the Adani stocks rout and asked the Centre to consider setting up a panel of domain experts headed by a former judge to look into strengthening the regulatory mechanisms.

• It had sought the views of the SEBI and the Centre as to how to ensure putting a robust mechanism in place since the capital movement now is seamless in the country.

What is SEBI?

• The Securities and Exchange Board of India (SEBI) was constituted as a non-statutory body on April 12, 1988 through a resolution of the government of India for dealing with all matters relating to the development and regulation of the securities market and investor protection and to advise the government on all these matters.

• SEBI was given statutory status and powers through an Ordinance promulgated on January 30, 1992. SEBI was established as a statutory body on February 21, 1992. The Ordinance was replaced by an Act of Parliament in April 1992.

• The Board has the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit.

The main objectives of SEBI are:

i) To protect the interest of the investors.

ii) To regulate and promote development of securities markets in India. 

The main functions of SEBI include:

i) Registration, regulation and supervision of intermediaries operating in the securities market.

ii) Promoting and regulating self-regulatory organisations.

iii) Prohibiting fraudulent and unfair trade practices relating to securities markets.

iv) Calling from or furnishing to other authorities, whether in India or abroad, such information as may be necessary for the efficient discharge of its functions. The Board, for  the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the central government.

Members of the Board

The Board consists of:

i) Chairman

ii) Two members from the officials of the finance ministry.

iii) One member from the officials of the Reserve Bank of India.

iv) Five other members of whom at least three shall be whole-time members, to be appointed by the central government.

• The general superintendence, direction and management of the affairs of the Board shall vest in the Board of members, which may exercise all powers and do all acts and things which may be exercised or done by the Board.

• A Financial Sector Regulatory Appointment Search Committee (FSRASC) has been created by the government for recommending names of suitable persons for appointment to board level positions of financial sector regulatory bodies.

• The candidates are shortlisted by the FSRASC headed by Cabinet Secretary.

• The shortlisted candidates are interviewed by the panel comprising Economic Affairs Secretary and three external members having domain knowledge. Besides, the high level panel has authority to recommend names other than those who have applied for the advertised post.

• Based on interactions, FSRASC recommends names to the Appointments Committee of Cabinet headed by the Prime Minister.

Securities Appellate Tribunal

• Securities Appellate Tribunal is a statutory body established under the provisions of the Securities and Exchange Board of India Act, 1992 to hear and dispose of appeals against orders passed by SEBI or by an adjudicating officer under the Act.

• SAT hears and disposes of appeals against orders passed by the Pension Fund Regulatory and Development Authority (PFRDA) under the PFRDA Act, 2013.

• SAT also hears and disposes of appeals against orders passed by the Insurance Regulatory Development Authority of India (IRDAI) under the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999 and the Rules and Regulations framed thereunder.

• The SAT consists of a presiding officer and two other members to be appointed by the central government.

• The presiding officer shall be a sitting or retired judge of the Supreme Court or High Court.

Investor protection measures of SEBI

i) Build the capacity of investors through education and awareness to enable an investor to make informed investment decisions. SEBI endeavours to ensure that the investor learns investing, that is, he obtains and uses information required for investing, evaluates various investment options to suit his specific goals, ascertains his rights and obligations in a particular investment, deals through registered intermediaries, takes necessary precautions, seeks help in case of any grievance, etc. 

ii) Make available every detail relevant for investment in the public domain. SEBI has adopted a disclosure based regulatory regime. Under this framework, issuers and intermediaries disclose relevant details about themselves, the products, the market and the regulations so that the investor can make informed investment decisions based on such disclosures. SEBI has prescribed and monitors various initial and continuous disclosures.

iii) Ensure that the market has systems and practices which make transactions safe. SEBI has taken various measures such as screen based trading system, dematerialisation of securities, T+2 rolling settlement, and framed various regulations to regulate intermediaries, issue and trading of securities, corporate restructuring, etc to protect the interests of investors in securities. It also ensures that only the fit and proper persons are allowed to operate in the market, every participant has incentive to comply with the prescribed standards, and the miscreants are awarded exemplary punishment.

iv) SEBI has a comprehensive mechanism to facilitate redressal of investor grievances against intermediaries and listed companies. It takes appropriate enforcement actions as provided under the law (including launch of adjudication, prosecution proceedings, directions) where progress in redressal of investor grievances is not satisfactory. It has set up a comprehensive arbitration mechanism in stock exchanges and depositories for resolution disputes of the investors. The stock exchanges have investor protection funds to compensate investors when a broker is declared a defaulter. Depository indemnifies investors for loss due to negligence of depository or depository participant.

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