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Question
What are the objectives of SEBI?
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Solution
Securities and Exchange Board of India (SEBI) was established for promoting an orderly and healthy growth of the securities market in India. The following points highlight the overall objectives of SEBI.
1. Regulation :- The basic objective of SEBI is to regulate the functioning of stock exchange and the securities market. It aims at providing a place where the issuers of securities (i.e. companies) can raise funds in an easy and confident manner.
2. Protection :- SEBI works on educating the investors and provide guidelines related to investment. It provides them adequate and reliable information about the companies and thereby, helps them in taking wise and informed investment decisions.
3. Prevention :- To combat the malpractice in trading of securities was the basic reason for the establishment of SEBI. Malpractice such as insider trading, violation of rules and regulations, non-adherence to Companies Act, etc. erodes the confidence of investors. SEBI aims at checking these malpractice by creating a balance between the self regulation of a business and the legal statutory regulations.
4. Code of Conduct :- Through regulation, SEBI develops a code of conduct for the fair trade practices by the intermediaries such as brokers, merchant bankers, underwriters, etc. SEBI controls the activities of these intermediaries and provides them a professional and competitive environment.
RELATED QUESTIONS
The company has to obtain consent of ............................ if issue of debentures exceeds Rs. 1 crore.
- SEBI
- Registrar
- National Stock Exchange
Mr. Vikas Mehra was the Chairman of 'IBM Bank'. The Bank was earning good profits. Shareholders were happy as the bank was paying regular dividends. The market price of their shares was also steadily rising. The bank was about to announce the taking over of 'UK Bank'. Mr. Vikas Mehra knew that the share price of 'IBM Bank' would rise on this announcement. Being a part of the Bank, he was not allowed to buy shares of the bank. He called one of his rich friends Mukand and asked him to invest Rs 4 crores in shares of his bank promising him the capital gains. As expected after the announcement, the share prices went up by 50% and the market price of Mukand's shares was now Rs 6 crores. Mukand earned a profit of Rs 2 crores. He gave Rs 1 crore to Vikas Mehra and kept Rs 1 crore with him. On regular inspection and by conducting enquiries of the brokers involved, Securities and Exchange Board of India (SEBI) was able to detect this irregularity. SEBI imposed a heavy penalty on Vikas Mehra.
Quoting the lines from the above para identify and state any two functions performed by SEBI in the above case.
Mr. Aditya Gupta was the chairman of ‘Vandan Bank’. The Bank was earning good profits. Shareholders were happy as the bank was paying regular dividends. The market price of their shares was also steadily rising. The bank announced taking over of ‘Karur Bank’. Aditya Gupta knew that the share price of Vandan Bank would rise on this announcement. Being a part of the bank, he was not allowed to buy shares of the bank. He called one of his rich friends Nimesh and asked him to invest Rs 6 crores in the shares of his bank promising him the capital gain.
As expected, the share prices went up by 40% and the market price of Nimesh’s shares was now Rs 8.4 crores. He had earned a profit of Rs 2.4 crores. He gave Rs 1.2 crore to Mr. Aditya Gupta and kept Rs 1.2 crore with him. On regular inspection and by conducting enquiries of the brokers involved, Securities and Exchange Board of India (SEBI) was able to detect this irregularity. SEBI imposed a heavy penalty on Aditya Gupta. By quoting the lines from the above para identify and state any two functions that were performed by SEBI in the above case.
Answer each of these questions in about fifteen words:
State three functions of SEBI rolled into one body.
Answer the question in about fifty words:
What is SEBI and what is its role?
Answer each of these questions in about fifty words:
Who manages SEBI?
Answer each of these questions in about fifteen words:
When was SIDBI established?
Select the correct answer from the options given below and rewrite the statement.
________ was established as a statutory body to regulate the securities market in India.
Select the correct answer from the options given below and rewrite the statement.
________ regulates the functioning of Stock Exchange in India.
Attempt the following:
Write a reply to a complaint by an investor
‘MYKAA Limited ‘is dealing in all types of cosmetic products. It is enjoying increased demand for its product during the last few years. For the purpose of expansion the company needs ₹ 100 crores as additional capital. The company decides to raise funds through equity shares. Chirag Kapoor, the finance manager of the company recommended that the shares may be sold through issuing houses or brokers. Identify and explain the method recommended by Mr.Kapoor through which the company can raise additional funds for expansion purposes.
Which of the following is the regulatory function of SEBI?
Which of the following is the development function of SEBI?
What are the protective function of SEBI?
Under which method, the securities are sold only to some selected individuals and big institutional investors rather than to the public.
Who among the following is the Chairman of SEBI as of August 2018
State the year in which Securitites Board of India was established?
______ is a legally enforceable document and helps to settle disputes/claims between the investor and the broker. It contains details of the number of shares bought or sold, the price, the date and time of deal, and the brokerage charges.
Rishu's friend Devina works as a Finance Manager in Perfect Solutions Ltd. Devina in a meeting with the directors of the company came to know that the firm would soon be declaring a bonus issue which would lead to an increase in the price of shares. On this basis, Devina advised Rishu to purchase the shares of Perfect Solutions Ltd., who thus bought the shares. SEBI can control malpractices like these through which of the following functions:
Which of the following is not a Protective Function performed by SEBI?
Which is the apex statutory body of capital market to which customers can complain to redress their grievances?
______ debt-equity ratio is preferred by the commercial banker over the years as it indicates financial strength of a unit.
Read the following text and answer the following question on the basis of the same:
Mr. A. Bose is running a successful business. Mr. Bose is the owner of R. K. Cement Ltd. Mr. Bose decided to expand his business by acquiring a Steel Factory. This required an investment of~ 60 crores. To seek advice in this matter, he called his financial advisor Mr. T. Ghosh who advised him about the judicious mix of equity (40%) and Debt (60%). Employ more of cheaper debt may enhance the EPS. Mr. Ghosh also suggested him to take loan from a financial institution as the cost of raising funds from financial institutions is low. Though this will increase the financial risk but will also raise the return to equity shareholders. He also apprised him that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on loan is a tax-deductible expense for computation of tax liability. After due deliberations with Mr. Ghosh, Mr. Bose decided to raise funds from a financial institution.
In the above case Mr. Ghosh suggested to raised more funds from debt. Higher debt-equity ratio results in:
Which of the following statements is incorrect?
'Due to various malpractices and multiplied investors grievances the Govt. of India decided to set up a separate regulatory body to protect the interest of investors and to regulate the securities market.'
- Identify the regulatory body set up by Govt. of India for the above-stated purpose.
- State any one objective of the regulatory body identified in (a) above.
Which of the following is not a function of Securities and Exchange Board of India (SEBI)?
SEBI calls for information and issues a show cause notice to stock exchange and its officials seeking explanation and conducting audit and enquiry. Which function is SEBI performing?
STATEMENT I: Electronic holdings can be converted into physical certificates with the process of dematerialisation.
STATEMENT II: There is no danger of theft, loss or forgery of share certificates in dematerialisation.
Choose the correct option from the following:
SEBI regulates the securities market in India.
SEBI regulates the prices of the securities listed in the market.
