SEBI Regulations of Stock Market

The Securities and Exchange Board of India (SEBI) is the primary regulator of securities markets in India. It was established on April 12, 1992, under the SEBI Act, 1992, to protect the interests of investors and promote the development of, and regulate, the securities market. SEBI’s regulatory framework plays a crucial role in ensuring transparency, accountability, and efficiency in the Indian stock markets.

Objective of SEBI Regulations:

• Investor Protection

SEBI regulations aim to safeguard the interests of investors in the securities market. By enforcing transparency, mandating disclosures, and curbing malpractices like insider trading and fraud, SEBI ensures that retail and institutional investors can trade with confidence. It also provides platforms for grievance redressal, educates investors about their rights, and promotes fair treatment in all market dealings.

• Market Transparency and Integrity

One of SEBI’s key objectives is to ensure transparency and integrity in the securities market. Regulations require companies to disclose accurate financial and operational information to prevent manipulation and misrepresentation. This helps create a fair environment where prices reflect real value and participants operate on a level playing field, thereby enhancing trust and efficiency in the functioning of stock markets.

• Market Development

SEBI promotes the orderly development of the Indian securities market through regulatory reforms, technological upgrades, and structural improvements. By encouraging innovation, introducing new financial instruments, and simplifying procedures, SEBI helps attract more participants—both domestic and global. These efforts enhance market depth, liquidity, and stability, contributing to India’s overall economic growth and integration with global financial markets.

Regulatory Framework:

SEBI has issued several regulations, circulars, and guidelines that govern various market participants, including stock exchanges, brokers, listed companies, mutual funds, foreign portfolio investors (FPIs), and more. These are binding and form the foundation of market governance in India.

Key SEBI Regulations:

a) SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR)

These regulations mandate timely and adequate disclosures by listed companies to ensure that investors are well-informed. It includes rules on:

• Corporate governance

• Financial reporting

• Shareholder rights

• Disclosure of material events

b) SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR)

These regulations govern public issues such as IPOs, FPOs, and rights issues. It ensures transparency in capital-raising processes and mandates companies to provide detailed disclosures in offer documents.

c) SEBI (Prohibition of Insider Trading) Regulations, 2015

These rules prohibit the trading of securities based on unpublished price-sensitive information (UPSI). Companies must maintain insider trading policies and codes of conduct to prevent misuse of confidential information.

d) SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST)

These are meant to protect the interest of minority shareholders during mergers and acquisitions. Acquirers must disclose when their shareholding crosses certain thresholds and make open offers to other shareholders.

e) SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003

This regulation deals with unfair trading practices like price rigging, circular trading, and pump-and-dump schemes. SEBI has powers to investigate and penalize such malpractices.

Regulation of Intermediaries:

SEBI regulates stock market intermediaries such as:

• Stock Brokers

• Merchant Bankers

• Registrars

• Credit Rating Agencies

• Depositories (NSDL, CDSL)

• Clearing Corporations

All intermediaries must be registered with SEBI and comply with its guidelines related to capital adequacy, code of conduct, grievance redressal, and risk management.

Regulation of Stock Exchanges:

SEBI oversees the functioning of stock exchanges such as BSE and NSE. It ensures that:

• Exchanges comply with listing norms

• Technology and systems ensure real-time trading and surveillance

• Investor protection funds are in place

• Surveillance mechanisms monitor unusual price movements

SEBI also mandates exchanges to implement trading halts, circuit breakers, and other risk mitigation tools.

Investor Education and Protection:

SEBI runs extensive investor awareness programs through digital campaigns, workshops, and regional investor education centers. It also operates the SEBI Complaints Redress System (SCORES) for lodging and tracking investor complaints.

Surveillance and Investigation Powers:

SEBI has quasi-judicial powers to:

• Investigate market manipulation

• Inspect books of accounts of listed companies and intermediaries

• Impose penalties

• Suspend or ban entities from the market

SEBI can conduct searches and seizures with judicial permission and initiate prosecution for criminal offences.

Corporate Governance and ESG Regulations:

SEBI has mandated several norms related to corporate governance, including:

• Board composition (e.g., independent directors)

• Audit committee roles

• CEO/CFO certification of financial statements

Additionally, SEBI is introducing Environmental, Social, and Governance (ESG) disclosures, making India one of the early adopters of sustainability reporting norms.