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Published : January 07, 2016 | Author : sneha suman
Category : Company Law | Total Views : 2936 | Rating :

sneha suman
LL.M ( National Law University, Odisha)

Analysis of the role of  Securities Exchange Board of India

The economy of India is based on sound financial system that helps in accelerating production, capital and economic growth of the country. The main objectives of every financial system of modern economy is to accumulate savings and to develop saving habits among the people. It also helps the saving to allocate into productive usage such as trade and commerce. The optimum and efficient use and allocation of the savings helps in increasing the economic growth of the country. Investment is the indicator of the economy level of the country and it is imperative to protect the interest of the investors.

Role of SEBI in Protecting The Investors

Securities Exchange Board of India is mainly concerned with protecting the right of investors and for this purpose there has been several amendments to the SEBI Act to comply with the changing need of the capital market. Investors are considered to be the significant component of the financial market and thus it is the duty of the board to ensure that their rights are protected. In general parlance investor is the person who invests in business or projects with an intention to make profit out of the capital incurred by him.

Grievances of The Investors

Being an integral component of capital market there are numerous problems faced by the investors. The general complaints that are submitted by the investors against the companies are:

v Furnishing of inadequate information or false representation made by the companies in its prospects, application forms, advertisements and rights offer document.

v Delay in receipt of share certificates, debenture certificates and allotment letters.

v Investors are also aggrieved by causing delay in the issuance of bonus or right shares.

v Investors also faces problem in regard to the listing of securities with stock exchanges.

v Failure to receive notices pertaining to meetings and annual reports also causes grievances to the investors.

Iinitatives Taken by SEBI for Protecting the Interest of Investors

Investors are considered to be the backbone of the securities market. They play vital role in determining the intensity of activity in the economy. SEBI works in the direction of the welfare of the investors. There are foremost steps taken by SEBI in order to protect the interest of the investors:

v Issue of Various Guidelines- It has issued various guidelines to Companies introducing new issues in the market related to merchant bankers, portfolio managers, mutual funds and underwriters. It acts a watchdog and keeps vigilance on all the intermediaries.

v Public Interest Advertisements- The reason behind issuance of public interest advertisement is to enlighten the investors and to make them aware about the precautions that should be taken by them in order to safeguard their interest. It has introduced several awareness programs and is working extensively in the area of investor protection.

v Addressing grievances of investors- One of the essential roles of SEBI is to redress the grievances of the investors. Non-receipt of refund, allotment letters, non-receipt of dividend are some major problems faced by the investors.

v Investor education- Investors education is of prime importance to make investors aware about their rights and how they can be secured. The two monthly publications are also introduced by SEBI like market review and newsletter for disseminating information to the investors regarding their rights and measures that should be taken by them in order to safeguard their interests.

v Disclosures- Disclosure of the affairs of the Companies operation is vital in order to assess the investment decision by the investors. It has made some significant changes in those fields so that they can ensure much protection to the investors and their investment is not futile.

Role of SEBI in Curbing Ponzi schemes

The biggest fear that constantly lingers in the mind of investors is the expose to financial fraud. The designated ‘Watchdog’ of Securities Market in India, the Securities Exchange Board of India has failed many a times to protect the interest of investors. New measures are implemented after the revelation of financial scandal’s but fraudsters seems to be one step ahead in this cat and mice game. This scandal that took place recently is considered to be the most highlighted scandal in the recent memory. This incident raised question mark on the functioning of SEBI as it intervened too late in protecting the interest of the investors. The incident is marked as a failure of SEBI in discharging its functions as the collective investment schemes were run in the name of chit funds which indicated the grave failure of the state machinery that are considered to be the regulators of the chit funds as per the law of the country.

Investment is considered crucial for the development of the capital market. Investment is the indicator of economy level of the country. It is vital to protect the interest of the investors so that they can be encouraged to make more investments. SEBI was established with the purpose of regulating the capital market and protecting the interest of the investors. Several regulations are made by the board for ensuring efficient functioning of the market. It would not be justified if the effort made by SEBI in improving its position as a regulator of market is not appreciated. It is extra ordinarily difficult for the market regulators to keep a check on each activities of the financial market and prevent the scams that take place. But, SEBI by revising its regulations and by making them more stringent and investors friendly has taken a commendable step. One of the major steps taken by the government in improving the condition of the capital market and protecting the interest of the investors was the amendment of the securities laws of the country. This amendment was most awaited and we can expect from the board to act vigilantly and to ensure that no such scams like Saradha and Sahara takes place in near future.

# Functions of SEBI, available at http://universalteacher.com/1/functions-of-SEBI (Last visited on December 31, 2015).
# Dr.Kvsn Jawahar Babu, Investor Protection measures by SEBI, available at http://prj.co/in/setup/business/paper61.pdf (Last visited on December 27, 2015)
# Shipra Bansal, Role of SEBI in investor protection, available at http://www.i-scholar.in/index.php/sajmmr/article/view/45204 (Last visited on December 28, 2015)
# Ravi Singhania, SEBI v. Investor Protection, available at http://www.icsi.edu/docs/webmodules/programmes/33NC/33souvearticlepsvenkitaraman.pdf (Last visited on December 28, 2015)
# Protection of Investors by SEBI, available at http://www.legalserviceindia.com/article/1334-Protection of the Investors-By-SEBI.html (Last visited on December 31, 2015)
# TAXMANN’S SEBI MANUAL VOLUME 1 (July 2014, 24th Edition)

Writing award This article has been Awarded Certificate of Excellence for Original Legal Research work by our Penal of Judges


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Article Comments

Posted by Saurav on January 13, 2016
Good Work. Very thorough.

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