In this article we are going to know more details about Securities and exchange board of India also known as SEBI and its functions.
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What is SEBI & its functions?
SEBI is a regulatory board established on 12th April 1992. It monitors and regulates the Indian capital and securities market. The main function of SEBI is to stop fraudulent activities of the stock market. Other than this, SEBI governs guides government and various organizations like RERA to make policies on the all investment sources.
SEBI has regional offices in New Delhi, Chennai, Kolkata and Ahmedabad along with other local regional offices across prominent cities in India and having head office at Bandra Kurla complex (BKC) in Mumbai.
Objectives
The following are the main objectives of SEBI :
- Provide protection to the investors
- Regulate and develop a code of conduct for ensuring fair practices by intermediaries like brokers, merchant bankers etc.
- Ensure that there is a steady flow in the market.
Structure
It has a corporate framework comprising various departments and each is managed by the department head. There are about 20+ departments under SEBI. Some of these departments are corporation finance, economic and policy analysis, debt and hybrid securities, enforcement, human resources and so on.
The hierarchical structure of SEBI consists of the following members:
- The chairman of SEBI is nominated by the Union Government of India.
- Two officers from the Union Finance Ministry will be a part of this structure.
- One member will be appointed from the Reserve Bank of India.
- Five other members will be nominated by the Union Government of India.
Functions
- It is the primary set up to protect the interests of investors in the securities market.
- Promotes the development of the securities market
- SEBI provides a platform for stockbrokers, sub-brokers, portfolio managers, investment advisers, share transfer agents and other associated people to register and regulate work.
- Regulates the operations of depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies.
- Categorize the Investment Schemes such as Mutual Funds, Equity, Debentures, Derivatives, Bonds, etc.
- Prohibits inner trades in securities, i.e. fraudulent and unfair trade practices related to the securities market.
- Ensures that investors are educated on the intermediaries of securities markets.
- It monitors substantial acquisitions of shares and take-over of companies.
- SEBI takes care of research and development to ensure the securities market is efficient at all times.
Rationalization & categorization of Mutual Funds by SEBI
Given below are the different mutual funds categorised and rationalised by SEBI-
- Equity Funds
| Category Name | Definition |
| Large Cap Fund | An open-ended equity scheme primarily investing in large cap stocks. Minimum 80% of total assets are invested in equity & equity related securities of large cap companies |
| Mid-Cap Fund | An open-ended equity scheme primarily investing in mid-cap stocks. Minimum 65% of total assets are invested in equity & equity related instruments of mid-cap companies |
| Small Cap Fund | An open-ended equity scheme primarily investing in small cap stocks. Minimum 65% of total assets are invested in equity & equity related securities of small cap companies |
| Multi Cap Fund | An open-ended equity scheme investing in stocks across market capitalization (large, small, mid-cap). Minimum 65% of total assets are invested in equity and equity related instruments |
| Large & Mid-Cap Fund | An open-ended equity scheme investing in stocks from both large cap & mid-cap companies. Minimum 35% of total assets are invested in equity of large cap companies and 35% in mid-cap companies |
| Dividend Yield Fund | An open-ended equity scheme primarily investing only in corporations that have significantly high dividend yielding stocks. Minimum 65% of total assets invested in equity |
| Value Fund | A Value Fund is a type of Mutual Fund which follows a value investing strategy. Minimum 65% of total assets is invested in equity & equity related instruments |
| Contra Fund | A Contra Fund is a type of Mutual Fund which follows a contrarian investing strategy. Minimum 65% of total assets is invested in equity & equity related instruments |
| Focused Fund | An open-ended equity scheme investing in maximum 30 stocks from either of the market caps. Minimum 65% of total assets are invested in equity related instruments |
| Sectoral/Thematic fund | An open-ended equity scheme investing in businesses that operate in a particular sector or industry. Minimum 80% of total assets are invested in equity of a particular sector/theme |
| ELSS | An open-ended equity linked tax saving scheme with a lock-in of three years. Minimum 80% of total assets are invested in equity related securities |
- Debt Funds
| Category Name | Definition |
| Overnight Fund | An open-ended debt scheme which invests in overnight securities having maturity of 1 day |
| Liquid Fund | An open-ended debt scheme which invests in debt & money market instruments with maturity up to 91 days |
| Ultra Short Duration Fund | An open-ended debt scheme which primarily invests in debt instruments with Macaulay duration between 3 and 6 months |
| Low Duration Fund | An open-ended debt scheme which invests in debt instruments with Macaulay duration between 6 and 12 months |
| Money Market Fund | An open-ended debt scheme which invests in debt & money market instruments having maturity up to 1 year |
| Short Duration Fund | An open-ended debt scheme which invests in debt instruments with Macaulay duration between 1 and 3 years |
| Medium Duration Fund | An open-ended debt scheme which invests in debt instruments with Macaulay duration of 4 to 7 years |
| Long Duration Fund | An open-ended debt scheme which invests in debt instruments with Macaulay duration greater than 7 years |
| Dynamic Bond Fund | An open-ended debt scheme which invests in debt instruments across durations |
| Corporate Bond Fund | An open-ended debt scheme which invests in the highest rated corporate bonds. Minimum 65% of total assets are allocated in corporate bonds |
| Credit Risk Fund | An open-ended debt scheme which invests in below highest rated corporate bonds. Minimum 65% of total assets are allocated in below highest rated corporate bonds |
| Banking and PSU Fund | An open-ended scheme which invests in debt instruments of Banks, Public Sector Undertakings and Public Sector Financial Institutions. Minimum 80% of total assets are allocated in securities from these sectors |
| Gilt Fund | An open-ended scheme which invests in government securities across maturity |
| Gilt Fund with 10 year constant duration | An open-ended debt scheme investing in government securities having constant maturity of 10 years |
| Floater Fund | An open-ended debt scheme primarily investing in floating rate instruments |
- Hybrid Schemes
| Category Name | Definition |
| Conservative Hybrid Fund | An open-ended hybrid scheme which primarily invests 75% to 90% of total assets in debt instruments and 10% to 25% in equity |
| Balanced Hybrid Fund | An open-ended balanced scheme which invests 40% to 60% of total assets in debt instruments and 40% to 60% in equity instruments |
| Aggressive Hybrid Fund | An open-ended aggressive scheme which primarily invests 65% to 80% of total assets in equity & equity related instruments. 20% to 30% of assets are placed in debt securities |
| Dynamic Asset Allocation or Balanced Advantage Fund | An open-ended fund which invests in equity/debt that is managed dynamically |
| Multi Asset Allocation Fund | An open-ended scheme investing in different asset classes with a minimum of 10% allocated in each asset class |
| Arbitrage Fund | An open-ended scheme investing in arbitrage opportunities with a minimum of 65% of total assets allocated in equity & equity related securities |
| Equity Savings | An open-ended scheme investing at least 65% in equity & equity related instruments and at least 10% in debt securities |
- Solution Oriented Schemes
| Category Name | Definition |
| Retirement Fund | An open-ended retirement solution oriented scheme which comes with a lock-in of 5 years or till retirement age (whichever is earlier) |
| Children’s Fund | An open-ended fund for investment for children which comes with a lock-in for minimum 5 years or till the child attains the age of majority |
- Other Schemes
| Category Name | Definition |
| Index Funds/ETF | An open-ended scheme which replicates/tracks the index. Minimum 95% of securities are invested in the securities of a particular index |
| FoF (Overseas / Domestic) | An open-ended fund of fund scheme which invests 95% of the total assets in the underlying fund |
Achievements
The following are the main achievements of SEBI:
- Advertising code for mutual funds.
- Total ban on forward trading
- Formulation of takeover code.
- Registration of a number of investor associations.
Grievance portal of SEBI
SEBI has its own platform for customer Grievance related to the financial markets. Its name is SCORES.
The long form of SCORES is SEBI Complaints Redress System. SCORES facilitates you to lodge your complaint online with SEBI and subsequently view its status.
The website name of the SEBI’s SCORES is SCORES.GOV.IN
Conclusion
Today SEBI has become the authorization body to form the rules and regulation for the stock markets.
It has an absolute power to investigate matters of both listed and unlisted companies.
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