Stock Marketing-4: Regulators of Capital Market

Regulators, the Guardians of Capital Market

Indian Capital Markets are regulated & monitored by the Ministry of Finance, the Securities & Exchange Board of India (SEBI), and the Reserve Bank of India (RBI).

Ministry of Finance

It regulates the Department of Economic Affairs - Capital Markets Division. This division is responsible for formulating the policies related to the orderly growth & development of the securities markets (i.e., shares, debt and derivatives) as well as protecting the interest of investors. 

Responsibility:

• Institutional reforms in the securities markets.
• Building regulatory & market institutions.
• Strengthening investor protection mechanism.
• Providing an efficient legislative framework for securities & markets. 

SEBI (Securities Exchange Board of India)

SEBI Act 1992 regulates the functioning of this independent body in governing the Indian stock exchanges. 

Functions of SEBI:

• It checks price rigging or price fixing.
• It prohibits insider trading.
• SEBI has prescribed a set of rules & regulations for each entity.
• Prohibits fraudulent & unfair trade practices.

Development Functions of SEBI

• SEBI promotes the training of intermediaries of the securities market.
• SEBI promotes stock exchange activities by adopting a flexible and adaptable approach.

Regulatory Functions of SEBI

• SEBI has framed rules & regulations, and a code of conduct.
• SEBI registers & regulates the working of mutual funds, etc.
• SEBI conducts inquiries & audits of stock exchanges.
• SEBI regulates the takeover/merger of the companies.

RBI (Reserve Bank of India)

RBI Act 1934 governs the policies framed by RBI. 

Functions:

• Implementation of monetary & credit policies
• Issuance of currency notes
• Government's banker 
• Banking system regulator
• Foreign Exchange through Foreign Exchange Management Act, 1999
• Managing payment & settlement system

National Stock Exchange (NSE)

NSE is regulated by SEBI & is under regular vigilance for all regulatory compliances. It is responsible for formulating & implementing the rules on:

• registration of members
• listing of securities
• monitoring of transactions
• compliance

SEBI's Investor Protection Strategy

• SEBI conducts workshops to educate & spread awareness about the investments.
• Introduce system & practice for screen-based trading, dematerializing securities & implementing T+2 rolling settlements.
• A disclosure-based regulatory regime that helps investors to make decisions carefully.
• Redressal of investor grievances.
• SCORES (SEBI Complaints Redress System) - web-enabled setup by SEBI to enable investors to lodge & follow up on their complaints, & track the status of redressal of such complaints online from the website.