Securities Exchange Board of India (SEBI) was set up in 1998 to regulate the functions of the securities market. SEBI promotes orderly and healthy development in the stock market transactions. It was left as a watchdog to observe the activities but was found ineffective in regulating and controlling them. As a result in May 1992, SEBI was granted legal status. SEBI is a body corporate having a separate legal existence and perpetual succession.
There are some purpose and role of SEBI are as follows:-
(i) Issues:-For issuers it provides a market place in which they can finance fairly and easily.
(ii) Investors:-For investors it provides protection and supply of accurate and correct information.
(iii)Intermediaries:- For intermediaries it provides a competitive professional market.
(i) To regulate the activities of the stock exchange/s.
iv)To regulate and develop a code of conduct for intermediaries such as brokers, underwriters, etc.
SEBI has three important functions these are:-
(i) Protective function
(ii) Development function
As protective functions, SEBI performs the following functions:-
(i) It checks price rigging:- Price rigging refers to manipulating the prices of securities with the main objective of inflating or depressing the market price of securities. SEBI prohibits such practice because this can defraud and cheat the investors.
(iii) SEBI prohibits fraudulent and unfair trade practice:-SEBI does not allow the companies to male misleading statements that are likely to induce the sale or purchase of securities by any other person.