SEBI Act 1992 Overview
The Securities and Exchange Board of India Act, 1992 is the primary legislation establishing SEBI as an autonomous statutory body with wide powers to protect investor interests, promote the development of the securities market, and regulate market intermediaries and listed companies.
The Securities and Exchange Board of India (SEBI) was established as a non-statutory body in 1988 and given statutory powers through the SEBI Act, 1992. The Act transformed SEBI from an advisory body into a powerful, independent regulator with quasi-legislative, quasi-executive, and quasi-judicial powers.
The SEBI Act vests SEBI with three broad categories of powers. Protective powers enable SEBI to prevent malpractices such as insider trading, price manipulation, fraudulent schemes, and unfair trade practices. Regulatory powers allow SEBI to frame regulations, issue guidelines and circulars, and prescribe codes of conduct for market intermediaries including brokers, merchant bankers, investment advisors, portfolio managers, and depositories. Developmental powers empower SEBI to promote investor education, develop market infrastructure, and encourage participation in the securities market.
Section 11 of the SEBI Act is the omnibus provision that grants SEBI the power to take measures it considers necessary for protecting investors and regulating the securities market. Under this section, SEBI has been active in issuing regulations on a wide range of subjects — insider trading (SEBI PIT Regulations), substantial acquisition of shares (Takeover Code), listing obligations (SEBI LODR), alternative investment funds, real estate investment trusts, and more.
Section 15 of the Act deals with penalties. SEBI has the power to impose monetary penalties for a range of violations including failure to furnish documents, manipulative and deceptive devices, insider trading, and non-compliance with SEBI orders. Penalties under the Act can run into crores of rupees. SEBI also has the power to debar individuals from accessing the securities market.
SEBI's Securities Appellate Tribunal (SAT), while not part of the SEBI Act itself but established under a related provision, provides an avenue for entities aggrieved by SEBI orders to appeal. Appeals from SAT lie to the Supreme Court of India. This multi-tier adjudicatory framework has been instrumental in developing a body of securities law jurisprudence in India.