Answer in brief.
1. State the functions of SEBI.
Ans: SEBI was set up with the objective of promoting the securities market, protecting the interest of the investors in securities market and to regulate the securities market. SEBI issues rules and regulations to be followed by the issuers of securities, the market intermediaries and the investors. It is a regulator of all the Stock exchanges in India.
The various functions of SEBI are –
1. To protect the interest of investors in securities market.
2. To promote the development of securities markets.
3. To regulate the business in stock exchanges and any other securities market.
4. To register and regulate the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustee of trust deeds, registrars to an issue, merchants bankers, underwriters, and such other intermediaries who may be associated with securities market.
5. To register and regulate the working of the Depositories, Depository Participants, Custodians of securities, foreign institutional investors, credit rating agencies.
6. To register and regulate the working of venture capital funds and collective investment schemes including mutual funds.
7. To promote and regulate self-regulatory organizations.
8. To prohibit fraudulent and unfair trade practice relating to securities markets.
9. To promote investors’ education and training of intermediaries of securities market.
10. To prohibit insider trading in securities.
2. State any four features of Stock Exchange.
Ans: Meaning: the term stock exchange is defined as, “An association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling of business in buying, selling and dealing in securities.”
Definition : “Stock exchanges are privately organized market which are used to facilitate trading in securities.” – by Husband and Dockerary
The important features of a stock exchange are as follows –
1. Market for Securities : Stock exchange is a place where all types of corporate securities as well as securities of government and semi-government bodies are traded.
2. Second Hand Securities : Securities traded in Stock exchange are those securities which are already issued by the companies. In other words, second hand securities are bought and sold among investors in a stock exchange.
3. Listed Securities : Only securities that are listed with the stock exchange can be traded on a stock exchange. Listing of securities helps in protecting the interest of investors as companies have to strictly comply with the rules laid down by the stock exchange.
4. Organised and Regulated Market : All Listed Companies have to comply with the guidelines of SEBI. Companies will also have to function as per the rules and regulations laid down by the Stock exchange.
5. Specific Location : Stock exchange is a specific physical place where securities are traded. It is a market place where brokers and intermediaries meet to conduct dealings in securities. Today, all trading is done electronically on a stock exchange.
6. Trading only through Members : Securities in a Stock exchange can be traded only by the members of the exchange on their own behalf or through authorised brokers.