DEST Practice 14

The Securities and Exchange Board of India, established in 1988 and given statutory powers under the Securities and Exchange Board of India Act of 1992, is the primary regulator of India's capital markets, responsible for protecting the interests of investors in securities, promoting the development of the securities market, and regulating the business in securities markets to ensure their orderly and fair functioning. India's capital markets have grown dramatically in depth, breadth, and sophistication over the three decades since economic liberalisation, with the market capitalisation of companies listed on Indian stock exchanges reaching several hundred lakh crore rupees, the daily trading volumes on the National Stock Exchange and the Bombay Stock Exchange running into thousands of crore rupees, and the range of financial instruments available to investors expanding to encompass equity shares, preference shares, corporate bonds, government securities, mutual fund units, exchange-traded funds, derivatives including futures and options, real estate investment trusts, infrastructure investment trusts, and sovereign gold bonds. The primary market, through which companies raise fresh capital from investors through initial public offerings, follow-on offerings, rights issues, and private placements, raised record amounts in recent years as favourable market conditions, investor confidence, and a pipeline of high-quality issuers combined to produce a surge in new listings. SEBI's investor protection mandate is discharged through comprehensive disclosure requirements that require listed companies and issuers to disclose all material information that could affect the investment decision of a reasonable investor, prohibitions on insider trading and market manipulation, registration and conduct requirements for intermediaries including brokers, depositories, portfolio managers, and investment advisers, the grievance redressal mechanism through the SCORES platform, and investor awareness and education programmes. The Investor Charter, introduced by SEBI for each category of market participant, sets out the rights of investors and the corresponding obligations of market intermediaries in a clear and accessible format. The Securities Appellate Tribunal provides an independent forum for hearing appeals against SEBI orders, ensuring that the regulator's decisions are subject to judicial review. Corporate governance requirements for listed companies, including the composition and independence of boards and their committees, the disclosure of related party transactions, the requirements for independent valuation of significant transactions, and the whistleblower policy, have been progressively strengthened to protect minority shareholders and ensure that company management is accountable to the full body of shareholders rather than only to the controlling shareholders. SEBI's jurisdiction extends to Alternative Investment Funds including private equity funds, venture capital funds, and hedge funds, as well as to Portfolio Investment Schemes through which foreign portfolio investors access Indian capital markets, requiring registration, compliance with investment restrictions and reporting requirements, and submission to SEBI's regulatory oversight.