SEBI: Powers, Functions and Major Regulations

Securities and Exchange Board of India (SEBI) is the apex regulator of India’s capital and securities markets. It protects investor interests, enforces fair market practices, and promotes the orderly development of the market through regulations and oversight.

Evolution and Board Structure

• Establishment: SEBI was set up in 1988 as a non-statutory body and was given statutory status on January 30, 1992, under the Securities and Exchange Board of India Act, 1992.
• Head office: The regulator is headquartered in Mumbai, Maharashtra.
• Regional offices: SEBI has regional offices in New Delhi, Kolkata, Chennai and Ahmedabad to monitor market activity.
• Board composition: The SEBI Board includes a Chairman, two members from the Union Ministry of Finance, one member from the Reserve Bank of India, and five other members appointed by the Union Government.
• Current leadership: Tuhin Kanta Pandey became the 11th Chairman of SEBI on March 1, 2025, for a three-year term.

Core Powers and Functions

• Triple mandate: SEBI has protective, regulatory and developmental functions.
• Investor protection: It safeguards investor capital and works to prevent fraud, unfair trade practices and market manipulation.
• Quasi-legislative powers: SEBI can frame regulations and guidelines for market participants.
• Quasi-executive powers: It can investigate violations and enforce compliance through its powers of supervision and action.
• Quasi-judicial powers: SEBI can issue orders, impose penalties and take administrative action under the law.
• Market oversight: It regulates stock exchanges, depositories, custodians, credit rating agencies, mutual funds and portfolio managers.
• Appeal mechanism: Orders of SEBI can be challenged before the Securities Appellate Tribunal (SAT), which hears appeals against SEBI decisions.

Legal and Institutional Framework

• SEBI Act, 1992: This is the principal law governing SEBI’s powers and functions.
• Securities Contracts (Regulation) Act, 1956: It forms part of the broader securities market legal framework.
• Depositories Act, 1996: It governs the depository system and securities held in dematerialised form.
• Statutory authority: SEBI functions as the apex market regulator under a legal framework designed to ensure transparency and investor confidence.

Major Regulatory Reforms of 2026

• Mutual Funds Regulations, 2026: These came into effect on April 1, 2026, replacing the 1996 framework.
• Base Expense Ratio: The new regulations unbundle fees through the Base Expense Ratio.
• Control threshold: The threshold of “control” has been fixed at 10% voting rights.
• Framework consolidation: The MF Lite framework for passive funds and the Specialized Investment Fund (SIF) framework have been consolidated.
• Stock Brokers Regulations, 2026: Notified on January 7, 2026, these replaced the 1992 regulations.
• Client segregation: The new rules make client fund segregation mandatory.
• Other regulated products: Brokers may offer financial products regulated by other authorities, such as RBI or IRDAI, subject to SEBI approval.
• ICDR Amendment, 2026: The amended Issue of Capital and Disclosure Requirements regulations allow depositories to mark encumbered pre-issue shares as non-transferable during the lock-in period.
• Abridged prospectus: The abridged prospectus has been shifted to a shorter, standardised template.
• AIF reporting: Under the updated reporting rules, fund managers must submit a simplified annual activity report and a limited-scope quarterly report.
• AIF Master Circular: The circular of June 3, 2026 consolidated guidelines issued up to May 31, 2026.
• GARUDA mechanism: Launched on July 30, 2026, GARUDA stands for “Green-Channel: AIF Rollout Upon Document Acknowledgement” and speeds up processing of AIF Placement Memorandums.

Important Exam Facts

SEBI became a statutory body on January 30, 1992, under the SEBI Act, 1992.

The Securities Markets Code Bill, 2025 proposes to consolidate the SEBI Act, 1992, the Depositories Act, 1996 and the SCRA, 1956 into one code.

Under the SEBI (Mutual Funds) Regulations, 2026, “control” is defined as 10% of voting rights.

Key Prelims Takeaways

• SEBI’s role: It is the apex regulator of India’s capital and securities markets.
• Statutory status: SEBI was established in 1988 and became statutory in 1992.
• Board structure: The Board includes a Chairman, government nominees and an RBI nominee.
• Functions: SEBI performs protective, regulatory and developmental functions.
• Powers: It has quasi-legislative, quasi-executive and quasi-judicial powers.
• Appeal body: SAT hears appeals against SEBI orders.
• Recent reforms: 2026 regulations updated mutual funds, stock brokers, disclosure norms and AIF reporting.