SEBI Act, 1992: Powers, Functions and Enforcement
Scope
The SEBI Act, 1992 questions test SEBI’s statutory mandate, the breadth of its powers and the limits of its enforcement machinery. SEBI is a statutory regulator with quasi-legislative, quasi-executive and quasi-judicial functions.
Core rules
- SEBI’s mandate under Section 11 is to protect investors, regulate the securities market and promote its development. It registers intermediaries, regulates exchanges and market products, and issues regulations and circulars.
- Powers include inspection, investigation, calling for information, issuing directions, cease-and-desist orders, disgorgement, and adjudication of penalties. It can also settle proceedings under its settlement regulations.
- Enforcement is not only punitive: SEBI may issue warnings, require compliance, restrain market access and order refunds. Appeals from SEBI orders go to the Securities Appellate Tribunal (SAT); appeals from SAT go to the Supreme Court.
- SEBI cannot itself impose imprisonment. Criminal prosecution for offences goes through the courts. Penalties are imposed by adjudicating officers after notice and hearing.
Worked example
An unregistered entity publishes paid stock tips and charges clients a monthly fee. SEBI finds it is carrying on investment advisory activity without registration. SEBI can issue a direction to stop the activity, order refunds or disgorgement, and impose a monetary penalty under the SEBI Act after adjudication. The entity can appeal to SAT within the prescribed period. SEBI cannot sentence the promoter to jail in that adjudication; a criminal complaint would have to be pursued separately.
Traps
Do not describe SEBI as a court or as a ministry. Do not confuse adjudication with criminal trial. Do not say SAT appeals go to a High Court - the statutory route is to the Supreme Court. Do not assume SEBI’s directions are limited to registered intermediaries; it can act against unregistered persons in the market.