India's securities and capital markets are regulated by the Securities and Exchange Board of India (SEBI) under the SEBI Act, 1992, alongside the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. SEBI oversees stock exchanges, listed companies, intermediaries (brokers, merchant bankers, mutual funds), takeovers, and insider trading.
SEBI's core regulatory role
SEBI was established under the SEBI Act, 1992 to protect investor interests and regulate the securities
market, with powers to register and supervise market intermediaries, investigate and penalize market
misconduct, and make binding regulations covering everything from IPO disclosure norms to mutual fund
operations. The Securities Contracts (Regulation) Act, 1956 separately governs recognized stock exchanges
and contracts in securities, while the Depositories Act, 1996 underpins the dematerialized (electronic)
holding of securities that is now standard in India -- together these three statutes form the backbone of
India's securities regulatory architecture, with SEBI's own regulations filling in the operational detail
within that statutory framework.
Listing, disclosure, and takeover regulation
A company going public must comply with SEBI's ICDR (Issue of Capital and Disclosure Requirements)
Regulations for the IPO process itself, and the LODR (Listing Obligations and Disclosure Requirements)
Regulations for ongoing disclosure once listed, covering matters like related-party transaction approvals,
board composition, and timely disclosure of material events to the exchanges. Acquiring a significant stake
in a listed company triggers the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, which
can require the acquirer to make an open offer to other shareholders once certain thresholds are crossed --
a framework designed to give minority shareholders an exit opportunity at a fair price when control of the
company changes hands.
Insider trading and market misconduct
The SEBI (Prohibition of Insider Trading) Regulations prohibit trading in a listed company's securities
while in possession of unpublished price-sensitive information, and require designated persons to make
periodic disclosures of their trading, alongside mandated trading-window closures around results and other
price-sensitive announcements. SEBI has wide powers to investigate suspected violations, freeze assets, and
impose substantial monetary penalties, and its orders can be appealed to the Securities Appellate Tribunal
(SAT), with a further right of appeal from SAT to the Supreme Court confined to substantial questions of
law.
