The Role Of SEBI In Augmenting The Indian Securities Market - A Regulatory Perspective

Author: LawSphereX

Category: Corporate & Insolvency

Published: 2026-08-23T21:31:13.677Z

Updated: 2026-08-30T07:12:37.841Z

THE ROLE OF SEBI IN AUGMENTING THE INDIAN

SECURITIES MARKET: A REGULATORY PERSPECTIVE Arya Deshpande, Graduate, Dr. Ambedkar College, Nagpur and CS Student at the Institute of Company Secretaries of India (ICSI)

ABSTRACT

The Securities and Exchange Board of India (SEBI) has played a paramount role in regulating, reforming and transforming the Indian securities market since its establishment. Over the years the regulatory framework of SEBI has seen monumental evolutions, reflecting the dynamic needs of globalisation and digitalisation. This article examines SEBI’s multifaceted role as a market regulator, developer and reformer, emphasising its continuous efforts in fostering market integrity and sustainable growth. This article aims to communicate a broader perspective that, the SEBI, being the capital market regulator is more than just a watchdog. It is the catalyst and the pillar of integrity which holds the Indian securities market together, thriving for better governance, healthy market environment, and innovation and investor protection.

This article begins with setting a historical background for the need of establishment of SEBI and then eventually paves the way for an expedition which briefs the reader about the prominent SEBI regulations. Highlighting the significance of case laws in legal profession, this article concludes by discussing and analysing the case of Picturehouse Media Ltd. Vs. Bombay Stock Exchange Ltd. Keywords: SEBI, Regulatory Framework, Capital Market development, Securities Market.

Historical Perspective The establishment of the Bombay Stock Exchange in 1875 as the first stock exchange in Asia, marked India’s dawn in the sphere of Capital Markets. Post which numerous regional stock exchanges were set up in Ahmedabad, Calcutta and Madras. The next juncture of evolution coincided with India’s independence and post-independence period. The government constituted the Controller of Capital Issues under The Capital Issues (Control) Act, 1947 to develop and regulate the capital market. The New Industrial Policy was established in 1991 which comprised of significant economic reforms such as Liberalization, Privatisation and Globalisation, referred to as the LPG Reforms. The Indian capital market went through dynamic transformation with the entry of new products and technology.

Subsequently, the Controller of Capital Issues was abolished and the Securities and Exchange Board of India was established. II.

The Securities and Exchange Board of India (SEBI): In February 1987 Budget session, the then Prime Minister Shri. Rajiv Gandhi, in his capacity as Finance Minister announced in the Parliament that: 1“... for a healthy growth of capital markets, investor’s rights must be fully protected. Trading malpractices must be prevented. Government have decide to set up a separate Board for the regulation and orderly functioning of stock exchanges and the securities industry. ” The SEBI acquired statutory powers in 1992 under the Securities and Exchange Board of India Act, 1992 (hereafter referred to as the SEBI Act, 1992) and thereafter the capital Issues (Control) Act, 1947 was repealed giving SEBI following statutory powers: a. To protect the interest of investors in the securities market b. To promote the development of securities market c.

To regulate the securities market In accordance with 2section 3 of the SEBI Act, 1992, The Board shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power subject to the

1 Dharohar, https://www.mism.org/pointer/a-story-of-establishment-of/ (last visited Apr. 26, 2025)

2 Securities and Exchange Board of India Act, 1992, § 3, No. 15, Acts of Parliament, 1992 (India)

provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued. 3Section 11 of the SEBI Act, 1992, lists down the various functions of the Board, including regulating the business of stock exchanges in India, registering and regulating the working of stock market intermediaries like stock brokers, share transfer agents, merchant bankers, bankers to the issue, custodians, underwriters, investment advisers, etc. , registering and regulating the working mutual funds (including Collective Investment Schemes), venture capital funds, alternative investment funds, prohibiting fraudulent and unfair trade practices related to the securities market, prohibiting insider trading of securities, promoting investor education, levying penalties etc.

The SEBI functions in the form of 4departments, which are further sub-divided into various divisions, to ensure effective and efficient working of the Indian securities market. For instance, the Corporate Finance department which deals with matters relating to delisting, corporate governance and accounting/ auditing standards, issuance and listing of securities, including initial and further listing requirements has three divisions: Division of Issues and Listing, Division of Corporate Restructuring Compliance and Monitoring Division and Social Stock Exchange and Policy Division. III.

Regulatory Framework The regulatory framework of SEBI comprises of a wide array of regulations enacted to ensure a reliable and transparent framework, keeping in view the investor interests and the market integrity. Following are some key SEBI Regulations:

1 SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

The SEBI (ICDR) Regulations, 2018 embodies multiple concepts pertaining to issue of capital by applicable entities and the disclosure requirements to be adhered by them. These regulations are divided into 12 Chapters and 20 Schedules which cover various capital raising options like Initial Public Offer (IPO), Further Public Offer (FPO), corporate actions like Rights and Bonus issue, Preferential Issue, Qualified Institutional Placement (QIP), etc. and their compliance and

3 Securities and Exchange Board of India Act, 1992, § 11, No. 15, Acts of Parliament, 1992 (India)

4 SEBI, https://www.sebi.gov.in/alldepartment.html (last visited Apr. 26, 2025)

disclosure requirements. The eligibility criteria and the provisions for minimum promoter’s contribution, lock-in period, appointment of lead managers and compliance officer, etc. is also laid down in these regulations.

2 SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Comprehensive Corporate Governance norms are laid down in the SEBI (LODR) Regulations,

2015 to ensure transparent, accurate and timely disclosures of material information and

reporting to the stakeholders. The regulation consists of 12 Chapters and 11 Schedules which together cover key areas such as compliance obligations, corporate governance norms and disclosure requirements. The regulation defines the concept of materiality and lays down that such material events must be disclosed to the general public. These regulations provide a comprehensive corporate governance framework and also play a vital role in ensuring market integrity and reliance in the Indian scenario.

3 SEBI (Prohibition of Insider Trading) Regulations, 2015

The SEBI (PIT) Regulations, 2015 aims to prohibit insider trading in India by regulating persons having possession or access to Unpublished Price Sensitive Information (UPSI), i.e. insiders and connected persons. As per 5Regulation 5(1) of this regulation, an insider shall formulate a trading plan and present it to the compliance officer for approval and public disclosure, pursuant to which trades may be carried out on his behalf in accordance with such plan. Moreover, the trading plan shall be in accordance with the conditions specified in regulation 5(2) of these regulations.

4. SEBI (Share based Employee Benefit and Sweat Equity) Regulations, 2021

These Regulations govern employee benefits linked to equity shares of the listed entity. The provisions of this regulation is applicable to Sweat Equity Shares, Employee Stock Option Scheme (ESOS), Employee Stock Purchase Scheme (ESPS), Stock Appreciation Rights Scheme (SARs), Retirement Benefit Scheme (RBS) and General Employee Benefit Scheme (GEBS). The regulations provide a framework for issuing listed share to employees of the listed entity in exchange for their valuable contribution and hard work. These regulations shall apply 5 SEBI (Prohibition of Insider Trading) Regulations, 2015, Pg. 17, https://www. sebi. gov. in/legal/regulations/mar- 2025/securities-and-exchange-board-of-india-prohibition-of-insider-trading-regulations-2015-last-amended-onmarch-12-2025-_92672.

html to any company whose equity shares are listed on a recognized stock exchange in India and who seeks to issue sweat equity shares or has a scheme for purposes mentioned in subregulation (4) of regulation 1 of the SEBI (SBEB and SE) Regulations, 2021.

5 SEBI (Delisting of Equity Shares) Regulations, 2021

Any entity which has listed its equity shares on one or more recognized stock exchanges and wishes to delist them from one or more of such recognized stock exchange shall comply with the SEBI Delisting regulations. The conditions for delisting are enlisted in Regulation 4 of these regulations. These regulations lay down two ways of delisting: voluntary delisting and compulsory delisting. In voluntary delisting, a company can delist its equity shares from one or more recognized stock exchanges, without giving an exit opportunity to its shareholders, if after such proposed delisting, its equity shares remains listed on a recognized stock exchange having nationwide trading terminal. Any company which wishes to delist its equity shares from all recognized stock exchanges shall provide an exit opportunity to its equity shareholders and comply with Chapter IV of the Delisting regulations.

While compulsory delisting on the contrary is initiated by the recognized stock exchange by a reasoned order on the grounds which are prescribed under the Securities Contracts (Regulation) Act, 1956. However, the company shall be given an opportunity of being heard before passing such an order.

6 SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

The SEBI (SAST) Regulations, 2011 governs the indirect or direct acquiring of voting rights or shares or control in a company, making sure that all major acquisitions and takeovers are regulated by a standardised set of regulations. It is important to note that SAST regulations are not applicable to Innovators Growth Platform of a recognised Stock Exchange, if the voting rights or shares or control is obtained directly or indirectly without making public issue. This regulation introduces and defines terms such as Acquirer, Target Company, Control, Enterprise value, person acting in concert, etc. Moreover, the regulation also specifies certain thresholds for acquisition, which upon being crossed, trigger an obligation to make a public announcement of an open offer, ensuring the interests of minority shareholders are protected.

7 SEBI (Buyback of Securities) Regulations, 2018

Companies wanting to repurchase their own shares or other specified securities in accordance with the Companies Act, 2013 are required to comply with these regulations. In accordance with this regulation, a company cannot buyback more than 25% of the aggregate paid-up equity share capital and free reserves of the company, based on consolidated or standalone financial statements, whichever is lower. Further, a company shall also consider the post buyback debtequity ratio, which ideally should not exceed 2:1. In simple words, the ratio of aggregate secured and unsecured debts payable by a company to the paid-up equity capital and free reserves should not exceed 2:1. Moreover, only fully paid up shares and specified securities are eligible to be bought back.

A company can either buyback shares or other specified securities on a proportionate basis, from the existing holders, or from the open market through stock exchange or book building process. The regulation lists down three sources of buyback: the company’s Free Reserves, Securities Premium Account or the proceeds of issue of any other specified securities. The regulation also enlists the general obligations to be followed by the company and by the merchant banker.

8 SEBI Regulations for Intermediaries

The SEBI has enacted various regulations for smooth functioning of the securities market intermediaries, keeping transparency and investor protection as its primary objective. These intermediaries such as stock brokers, merchant bankers, custodians, credit rating agencies, bankers to an issue, research analysts, mutual fund advisors, portfolio managers, etc. are mandatorily required to adhere to their respective intermediary regulation. Such intermediary regulations provides the registration criteria and process, details regarding application, furnishing of relevant documents, obligations and responsibilities, etc.

Following is an illustrative list of the various regulations governing stock market intermediaries in India: a) SEBI (Research Analysts) Regulations, 2014 b) SEBI (Credit Rating Agencies) Regulations, 1999 c) SEBI (Custodian) Regulations, 1996 d) SEBI (Bankers to an Issue) Regulations, 1994 e) SEBI (Merchant Bankers) Regulations, 1992 f) SEBI (Stock Brokers) Regulations, 1992 IV.

Securities Exchange Board of India Act, 1992: The SEBI Act, 1992 lays down the legal foundation for the SEBI to regulate the Indian securities market, ensure fair trading practices and protect integrity and interests of investors. The act also provides for an efficient appeal mechanism for grievance redressal through the Securities Appellate Tribunal (SAT). Moreover, the SEBI has power to impose penalty if any provisions of the act or regulations made thereunder are contravened. An illustrative list of contraventions and their corresponding penalty under 6Chapter VI A is as under: Section Contravention Penalty 15A Failure to furnish information, return, etc. Penalty of at least 1 lakh rupees but may extend to 1 lakh rupees per day during which such failure continues, subject to a maximum of 1 crore rupees.

15C Failure to redress investor’s grievances Penalty of at least 1 lakh rupees but may extend to 1 lakh rupees per day during which such failure continues, subject to a maximum of 1 crore rupees. 15G Insider Trading Penalty of at least 10 lakh rupees but which may extend to 25 crore rupees or 3 times the amount of profits made out of insider trading, whichever is higher.

The Role of SEBI in shaping India’s Capital Market: It is an undeniable fact that the SEBI has played a pivotal role in shaping the current picture of the Indian securities market environment. Over the decades, SEBI has introduced various 7market reforms for the promotion and development of the market as a whole including introduction of electronic and demat trading, setting up of clearing corporations, strengthening risk management framework, enhancing transparency and better corporate governance, introduction of SECORS (SEBI Complaints Redress System) for efficient redressal of investor grievances, introduction of BRSR (Business Responsibility and Sustainable Reporting) to enhance ESG disclosures, reduction in rolling settlement timeline, etc.

These continuous market reforms aim to promote investor confidence and facilitate sustainable market growth in the long run, ensuring alignment with global innovation, trends and technology. Thus, carving a path for improvement and advancement for the Indian stock market in this ever evolving and dynamic era. VI.

Case Law: Understanding and analysing case laws is a crucial aspect of legal studies. Case laws illustrate application of laws in real world scenarios which in turn provides an in-depth understanding of their practical implications through a structured approach. The judgements or orders or decisions passed by the courts or tribunals play a vital role in providing clarity and guidance to legal professionals regarding interpretation and application of laws and in ensuring consistency and fairness in legal rulings. 8Picturehouse Media Ltd. Vs. Bombay Stock Exchange Ltd.: Company Background: Picturehouse Media Ltd. is a Chennai based listed company, which is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). It is involved in movie production and related activities, including film financing.

7 Dharohar, https://www.mism.org/pointer/sebi--an-evolution-of/ (last visited Apr. 26, 2015)

8 Picturehouse Media Ltd. Vs. Bombay Stock Exchange Ltd. , (2020) Misc. Application No. 588 of 2019 and Appeal No. 542 of 2019 Facts of the case: • The Appellant had filed an appeal questioning the order passed by the BSE which imposed a penalty of Rs. 7,59,920/- for violating the provisions of Regulations 17(1), 19(1) and 19(2) of SEBI (LODR) Regulation, 2015. • Picturehouse Media Ltd. is a public listed company and on 6th March, 2017, one nonexecutive woman director resigned and subsequently, the post became vacant, which as per SEBI (LODR) Regulation, 2015 was required to be filled up by another woman director. • Since there was a delay in appointment of such a director, the aforesaid penalty was imposed by the BSE under the SEBI (LODR) Regulation, 2015. • Eventually, one woman was appointed as a non-executive director on 5th December, 2018.

• The contention of the learned counsel for the appellant was, that the appointment could not be made on account of financial condition of the appellant. It was further contended that the amount is excessive and unreasonable and does not commensurate with the misconduct. SAT Order: The quantum of penalty imposed was as per the circular and SAT did not find any discrepancy. In the light of default committed by the appellant SAT did not find any error in the impugned order and dismissed the appeal.