Security Exchang Board of India (SEBI) was established as the regulator for Stock and Security market in India under Securities and Exchange Board of India Act 1992. The main object of SEBI is to protect the interests of investors in securities and promotes the development of the securities market through appropriate regulations.
The following agencies, organizations and entities involved in stock markets and security markets are coming under the purview of SEBI regulations.
1. Stock brokers, sub-brokers, share transfer agents,
2. Bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers
3. Investment advisers and such other intermediaries who may be associated with securities markets in any manner,
4. Depositories [Depository participants,] custodians of securities,
5. Foreign institutional investors,
6. Credit rating agencies and such other intermediaries as notified by SEBI.
SEBI is vested with the following powers as a regulator, if it thinks necessary, to protect the interest of the investor.
1. May suspend the trading of any security in a recognized stock exchange; restrain persons from accessing the securities market
2. Prohibit any person associated with securities market to buy, sell or deal in securities;
3. Suspend any office-bearer of any stock exchange or self- regulatory organization from holding such position;
4. Impound and retain the proceeds or securities in respect of any transaction which is under investigation;
5. Attach bank account/s or any transactions entered therein if such proceeds involved in violation of the act and regulations made there under ( Attachment is subject to approval of the order by a first class Judicial Magistrate).
Clause 49 amendment to the listing agreement of SEBI is an important amendment to SEBI regulations. The amendment is a part of global trend in strengthening corporate governance. In terms of amendment in the regulations, the company’s board should comprise at least 50% independent non-executive directors. Those independent directors cannot be relatives; senior management staff or those who have financial relationship with the company. Failure to comply above clause would attract punitive action by SEBI which includes hefty fine up to Rs.1 crore or delisting from the Stock exchanges. The CEO or Company Secretary has to personally certify the authenticity of various declarations made to the board and to the shareholders.