Securities and Exchange Board of India - Role as a Regulator

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Case Details:

Case Code : FINC036
Case Length : 14 Pages
Period : 1999 - 2004
Pub. Date : 2005
Teaching Note :Not Available
Organization : SEBI
Industry : -
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Genesis of SEBI

In the 1980s, Indian capital markets witnessed significant changes. During the sixth Five-Year plan (1980-85), many major industrial policy changes were introduced.

These included opening up the Indian economy to foreign corporations and emphasizing a greater role for the private sector.

Many companies tapped the primary market to raise required funds from the public. The total capital raised from the primary market increased from Rs 1.96 bn in the fiscal 1979-80 to Rs. 65 bn in 1989-90.

With more companies raising money by issuing shares, retail investors got another investment avenue to park their surplus funds.

Between 1987 and 1991, 12% of household savings were invested in equity and corporate debentures as compared to only 7% between 1982 and 1985, signifying the increasing number of retail investors in the stock market.

With the increasing interest of retail investors, many dubious companies that did not have any real plans to do business raised money by issuing shares, only to vanish at a later date.

These malpractices took on significant proportions and the grievances of retail investors increased alarmingly. The investors turned to GoI for redressal. However, GoI was rather helpless in solving the retail investors' grievances in such large volumes because of the lack of proper penal provisions.

The government, therefore, constituted SEBI as a supervisory body to regulate and promote security markets...

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