Evolution of SEBI:

To make the stock market a more friendly place for investors (especially small investors)
SEBI (Securities and Exchange Board of India) was establishes as a non statutory body in
1988. The Indian Capital Market had started developing very fast during the 1980’s. The
amount of capital raised by companies from the primary market increased from a modest 200
crores in 1980 to a substantial 6500 crores in 1990. This implied a great exposure of public
money, which also attracted a number of fly-by-night operators. This necessitated a watchdog
that could safeguard the interests of investors. SEBI was provided a statutory status in 1992
in the immediate aftermath of infamous securities scam perpetrated by “Harshad Mehta”.

To elaborate, the important role & functions of SEBI can be listed down as follows:

SEBI was entrusted with primary task of protecting the interest of the investors. In addition,
SEBI was also entrusted with the twin objectives of developing and regulating the stock
market. SEBI has been entrusted with a wide ranging role to develop and regulate the
financial markets. The primary task of SEBI is to regulate the affairs of the stock markets.

In this respect, SEBI has introduced a number of notable reforms such as:

 dematerialization of shares,
 online share trading,
 approval for stock indices trading,
 derivatives trading,
 introduction of electronic trading: This has helped in making markets more efficient
when compared to trading shares in physical form,
 PAN (Permanent Account Number) mandatory for all the investors to make market
more transparent.

This has made the market broad based and easily approachable by everyone. Over the years,
SEBI has also evolved and enforced a code of conduct for the banks, financial institutions,
companies, mutual funds, financial intermediaries/ brokers and portfolio managers.

In addition, SEBI deals with following activities related to financial markets-

 Primary market issues
 Secondary market issues: Supervision of functioning of stock exchanges. Registering
and regulating market participants like Stock brokers, sub brokers, merchant bankers,
portfolio managers, Foreign Institutional Investors (FII's) and other entities who
participate in stock markets. Curbing Volatility (Circuit Breakers: Circuit Breakers
are a means to reduce volatility in stock exchanges. They represent the maximum
percentage change in a stock(upside or downside) on a given day. Once a stock hits
the circuit breaker, trading is halted in the stock for a short duration. This gives
market participants enough time to digest any new information that is causing the
 stock to move. This averts stock price from rising to dizzying heights rapidly in an
euphoric market or falling rapidly due to panic selling) and investigating unusual
movement in stock prices.
 Prohibiting fraud and unfair trade practices related to securities markets.
 Prohibiting insider trading (Any information that is confidential and not known to the
public that has the potential to affect the stock price is called insider information. Any
trade that is executed based on this information is called insider trading) and circular
trading (is a means of artificially rigging stock prices by synchronously entering buy
and sell orders at predetermined prices and for predetermined quantities) in securities.
 Mutual Funds
 Takeovers and Amalgamations: Regulating substantial acquisition and takeovers of
companies.
 Collective investment schemes
 Share buy backs
 Delisting of shares from stock exchanges
 Handling investor grievances and complaints related to any of the above mentioned
activities.
 Undertakes periodical investor education initiatives, workshops and seminars to raise
investment and financial awareness.

SEBI has come a long way since its inception as an institution regulating the Indian Capital
Markets. It has initiated a lot of reforms to make the market safer for investors.