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In this article we are going to know more details about Securities and exchange board of India also known as SEBI and its functions.

We are going to learn from basic to understand the topic for better understanding. But if you are searching about the specific piece of information then you can quickly move by taking help of the below index. Just click on the words for which you want to know.


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.

SEBI Bhavan : SEBI and its functions - Arable Life
Credits : WikiPedia.com

Objectives

The following are the main objectives of SEBI :

  1. Provide protection to the investors
  2. Regulate and develop a code of conduct for ensuring fair practices by intermediaries like brokers, merchant bankers etc.
  3. 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.
SEBI Powers : SEBI and its functions - Arable Life

Rationalization & categorization of Mutual Funds by SEBI

Given below are the different mutual funds categorised and rationalised by SEBI-

  • Equity Funds
Category NameDefinition
Large Cap FundAn 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 FundAn 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 FundAn 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 FundAn 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 FundAn 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 FundAn 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 FundA 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 FundA 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 FundAn 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 fundAn 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
ELSSAn 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 NameDefinition
Overnight FundAn open-ended debt scheme which invests in overnight securities having maturity of 1 day
Liquid FundAn open-ended debt scheme which invests in debt & money market instruments with maturity up to 91 days
Ultra Short Duration FundAn open-ended debt scheme which primarily invests in debt instruments with Macaulay duration between 3 and 6 months
Low Duration FundAn open-ended debt scheme which invests in debt instruments with Macaulay duration between 6 and 12 months
Money Market FundAn open-ended debt scheme which invests in debt & money market instruments having maturity up to 1 year
Short Duration FundAn open-ended debt scheme which invests in debt instruments with Macaulay duration between 1 and 3 years
Medium Duration FundAn open-ended debt scheme which invests in debt instruments with Macaulay duration of 4 to 7 years
Long Duration FundAn open-ended debt scheme which invests in debt instruments with Macaulay duration greater than 7 years
Dynamic Bond FundAn open-ended debt scheme which invests in debt instruments across durations
Corporate Bond FundAn open-ended debt scheme which invests in the highest rated corporate bonds. Minimum 65% of total assets are allocated in corporate bonds
Credit Risk FundAn 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 FundAn 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 FundAn open-ended scheme which invests in government securities across maturity
Gilt Fund with 10 year constant  durationAn open-ended debt scheme investing in government securities having constant maturity of 10 years
Floater FundAn open-ended debt scheme primarily investing in floating rate instruments
  • Hybrid Schemes
Category NameDefinition
Conservative Hybrid FundAn open-ended hybrid scheme which primarily invests 75% to 90% of total assets in debt instruments and 10% to 25% in equity
Balanced Hybrid FundAn open-ended balanced scheme which invests 40% to 60% of total assets in debt instruments and 40% to 60% in equity instruments
Aggressive Hybrid FundAn 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 FundAn open-ended fund which invests in equity/debt that is managed dynamically
Multi Asset Allocation FundAn open-ended scheme investing in different asset classes with a minimum of 10% allocated in each asset class
Arbitrage FundAn open-ended scheme investing in arbitrage opportunities with a minimum of 65% of total assets allocated in equity & equity related securities
Equity SavingsAn open-ended scheme investing at least 65% in equity & equity related instruments and at least 10% in debt securities
  • Solution Oriented Schemes
Category NameDefinition
Retirement FundAn open-ended retirement solution oriented scheme which comes with a lock-in of 5 years or till retirement age (whichever is earlier)
Children’s FundAn 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 NameDefinition
Index Funds/ETFAn 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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Thank you signage from SEBI and its functions - Arable Life
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