Capital Market and SEBI

Capital Market
There are broadly two types of financial markets in an economy –

capital market and money market. Now capital market deals in financial
instruments and commodities that are long-term securities. They have a
maturity of at least more than one year.
Capital markets perform the same functions as the money market. It

provides a link between the savings/investors and the wealth creators.
The funds will be used for productive purposes and create wealth in the
economy in the long term.
One of the important functions of the capital markets is to provide ease

of transactions for both the investors and the companies. Both parties
should be able to find each other with ease and the legal aspect of things
should go smoothly. Now let us take a look at the two major types of
capital markets.
Primary Market
The most important type of capital market is the primary market. It is
what we call the new issue market. It exclusively deals with the issue of
new securities, i.e. securities that are issued to investors for the very first
time.
The main function of the primary market is capital formation for the
likes of companies, governments, institutions etc. It helps investors
invest their savings and extra funds in companies starting new projects
or enterprises looking to expand their companies.
The companies raise money in the primary market through securities

such as shares, debentures, loans and deposits, preference shares etc.
Let us take a look the various methods of how new securities are floated
in the primary market.
Secondary Market
After the primary market is the secondary capital market. This is more
commonly known as the stock market or the stock exchange. Here the
securities (shares, debentures, bonds, bills etc) are bought and sold by
the investors.
The main point of difference between the primary and the secondary
market is that in the primary market only new securities were issued,
whereas in the secondary market the trading is for already existing
securities. There is no fresh issue in the secondary market.
The securities are traded in a highly regularized and legalized market

within strict rules and regulations. This ensures that the investors can
trade without the fear of being cheated. In the last decade or so due to
the advancement of technology, the secondary capital market in India
has seen a great boom.
1. What is SEBI
Securities and Exchange Board of India (SEBI) is a regulatory body of the Government
of India. It controls the securities market. It was established on April 12, 1992 under
the SEBI Act, 1992. It is headquartered at the Bandra Kurla Complex in Mumbai, India.
It has regional offices in major cities of India such as New
Delhi, Kolkata, Chennai and Ahmedabad. These cover the North, South, East and West
regions of India. Besides, it has a network of local branch offices in prominent Indian
cities.
2. Structure of SEBI
SEBI has a corporate framework comprising of various departments each managed by
a department head. Some of the departments are foreign portfolio investors,
communications, human resources, collective investment schemes, commodity and
derivative market regulation, legal affairs department, etc.
SEBI’s hierarchical organisation structure consists of nine members:
– a chairman nominated by the Union Government of India
– two members who are officers from the Union Finance Ministry
– one member from the Reserve Bank of India
– five other members who are also nominated by the Union Government of India.
3. Functions of SEBI
The Preamble of the Securities and Exchange Board of India describes the basic
functions of SEBI is the protection of investors interests in securities and to be a
platform to promote, develop and regulate the securities market in India as well as the
relating matters that are connected with it.
The securities exchange board is permitted to approve rules and laws pertaining to the
stock exchanges. It also implies that SEBI should enforce the laws for stock exchanges
to follow. SEBI examines books of accounts of financial mediators and recognized stock
exchanges. Another role of SEBI is to urge respective companies to list their shares in
stock exchanges and manage the registration of distributors/brokers.
4. Authority and Power of SEBI

The SEBI board has three main powers:
 Quasi-judicial- In this, SEBI can deliver judgments related to the securities

market pertaining to fraud and other unethical practices. This helps to ensure
fairness, transparency, and accountability in the securities market.
 Quasi-legislative- These powers allow SEBI to frame rules and regulations to
protect interests if the investors. Some of its regulations consists of Insider
Trading Regulations, Listing Obligation, and Disclosure Requirements etc. These
have been formulated to keep malpractices at bay.
 Quasi-executive- SEBI is empowered to implement its regulations and to put up a
case against violators. It is also authorized to inspect books of accounts and
other documents if it comes across any violation of the regulations.
Despite the powers, the results of SEBI’s functions still have to go through the
Securities Appellate Tribunal and the Supreme Court of India.

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Capital Market and SEBI

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Capital Market

There are broadly two types of financial markets in an economy –

Capital markets perform the same functions as the money market. It

One of the important functions of the capital markets is to provide ease

The companies raise money in the primary market through securities

The securities are traded in a highly regularized and legalized market

4. Authority and Power of SEBI

 Quasi-judicial- In this, SEBI can deliver judgments related to the securities

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