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INTRODUCTION
The pace of economic development of any country is greatly influenced by
capital formation, as it is the kingpin of economic advancement. And, the
most important source of capital formation is the capital market which
pools the capital resources of the country. Capital market, however, is a
complex place fraught with risks which a small investor cannot afford to
take. There are innumerable factors which constantly influence the
behaviour of the capital market .The Securities and Exchange Board
of India (frequently abbreviated SEBI) is the regulator for the securities
market in India. It was established in the year 1988 and given statutory
powers on 12 April 1992 through the SEBI Act, 1992.With the
announcement of the reforms package in 1991, the volume of business in
both the primary and secondary segment of the capital market has been
increased enormously till now.
A multi crore securities scam rocked the Indian financial system in
1992(Harshad Mehta scam). The then existing regulatory framework was
found to be fragmented and inadequate and hence, a need for an
autonomous, statutory, and integrated organization to ensure the smooth
functioning of capital market was felt. To fulfil this need, the Securities and
Exchange Board of India (S.E.B.I), which was already in existence since
April 1988, was conferred statutory powers to regulate the capital market.
STRUCTURE OF SEBI
Initially SEBI was a non statutory body without any statutory power.
However in the year of 1995, the SEBI was given additional statutory
power by the Government of India through an amendment to the
Securities and Exchange Board of India Act 1992. In April, 1998 the SEBI
was constituted as the regulator of capital markets in India under a
resolution of the Government of India.
The SEBI is managed by its members, which consists of following:
OBJECTIVE OF SEBI
The primary objective of SEBI to promote healthy and orderly growth of
securities market and investor protection. The objectives of SEBI are
follows:
The investors
Mutual Funds
Mutual funds are financial intermediaries which collect the savings of
investors and invest them in a large and well diversified portfolio of
securities. The major advantages for the investors are reduction in risk,
expert professional management, diversified portfolio and tax benefit. By
pooling of their assets through Mutual Funds, Investors achieve economies
of scale. Mutual Funds are to be established in the form of Trust under
Indian Trust Act, and are to be operated by Asset Management Company
(AMC). Mutual Funds dealing exclusively with Money Market Instruments
are to be regulated by RBI. Mutual Funds dealing primarily with capital
market and also partly in Money Market Instruments are to be regulated
by SEBI. All schemes floated by Mutual Funds are to be registered with
SEBI.
Literature review
PASHA SHAIK ABUDL MAJEEB, KRISHNA R.VAMSI, KIRAN V.
HEMANTHA GOPI (2012) found that the SEBI should stop being preoccupied with day-to-day regulations and become more of a visionary. The
SEBI can ensure a free and fair market and take India into league of major
global capital markets in the next round of reforms. To enable this, it has
to thoroughly review its structure and functioning. The SEBI has to balance
between the costs of regulation and market development. There should be
cross-border cooperation between various regulators and between
regulators and industry.
James P. M. and Narayanan K.S.Manoj (2010) Mutual Funds is to
provide better returns to investors by minimizing the risk associated with
capital market investment. The Mutual Fund industry has been in
operation in India since 1964 and it occupies a pivotal place in Indian
Capital Market for mobilising small savings and channelising it to the field
of investment. Though there has been a tremendous growth in the Mutual
Fund industry in India over the four decades of its existence, there has
been violent fluctuations and even negative growth in some years.
Securities and Exchange Board of India (SEBI), the watch and ward of
Indian Capital Market has come out with separate regulations for the
organisation and operation of mutual funds and thereby has been to an
extent successful in bringing the mutual fund industry to the right track.
Kumar Aayush, Pegu Dhiren, Shashank Prateeti Goyal The scope of
the standards required to be adhered to under the FII Regulations is very
widely worded as a result of which the regulations become vague. It thus
becomes impossible to determine the content of the provisions which in
turn makes it impossible to fix the responsibility. Thus, for effective
enforcement of FII Regulations, it is extremely important that this loophole
be plugged to provide clarity to the scope of law governing the FIIs.
Singh Rajiv Kumar (2012) analyse whether SEBI is able to regulate the
activities in Mutual Fund Market and whether its regulatory role is capable
to protect the interest of huge investors. This study also attempts to
analyse the shortcomings (if any) in the regulatory regime and suggest
some measure to increase its effectiveness. The advantages for the
investors are reduction in risk, expert professional management,
diversified portfolio, liquidity of investment and tax benefit. This fast
grown industry is regulated by the Securities and Exchange Board of India
(SEBI).
Further, the penetration of mutual funds in India (as measured by the AUM/GDP
ratio) remains low at 4.7 percent as compared to 77.0 percent in the US, 41.1
percent in Europe and 33.6 percent in the UK. Mutual funds also constituted only
3.3 percent of households financial savings in FY10, which further contracted to
-1.2 percent and -1.1 percent in FY11 and FY12, respectively, due to large
redemption and capital losses.
Relaxing KYC norms for small investors, widening the distributor network to
include postal agents and retired officials, and recommending the inclusion of
equity scheme mutual fund products under REGSS could help strengthen the
last-mile connectivity in mutual fund distribution. Through its recent
initiatives and announcements, SEBI has given a much needed boost to the
mutual fund sector but the industry is waiting for a long term initiative by the
regulator that will put this sector amongst the most preferred instrument of
investment.
References
Singh Rajiv Kumar (2012), Role of Securities & Exchange Board of India
(SEBI) in Regulating Mutual Funds International Journal of Trade and
Commerce, January-June 2012, Volume 1,No. 1.
PASHA SHAIK ABUDL MAJEEB, KRISHNA R.VAMSI, KIRAN V. HEMANTHA
GOPI (2012) A STUDY ON ROLE OF SEBI IN INDIAN CAPITAL MARKET: AN
EMPIRICAL ANALYSIS, International Journal of Multidisciplinary Research,
Vol.2 Issue 3.
James P. M. and Narayanan K.S.Manoj (2010), Role of Sebi in Regulation
of Mutual Funds, Journal of Interdisciplinary Studies and Research, Vol. XI
No. 2.
Kumar Aayush, Pegu Dhiren, Shashank Prateeti Goyal, ROLE OF SEBI
AND FII, ssrn.com/abstract=2235987.
RBI Annual Report FY12
AUM by geography, AMFI, March 2012
Steps to re-energize Mutual Fund Industry, SEBI. September 2012
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