Violation of SEBI Act and Rules in India: A Study on ‘Other than Collective Investment Scheme’

Abstract

Economy of any country largely depends on its capital market now more than ever before. A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise funds by selling securities to general public and other financial institutions. The capital market includes the stock market (equity securities) and the bond market (debt). Capital markets of India are monitored by financial regulator SEBI (Securities Exchange Board of India). SEBI oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties. The need for a financial regulator for a country like India is due to the following reasons as India is an 'informationally' weak market, to boost the confidence of lay investors who have been beaten by repeated scams, to soften interest rates and to enhance investing skills in India. But since the formation SEBI in the year 1992 every 2-3 years there has been a new 'scam'. Each scam has led to SEBI being conferred with greater powers. Scams are administered by SEBI officials. Sentencing and prosecution is done by SEBI officials. Recent rise in scams and scandals in Indian market have made investors to doubt on the efficiency of Indian Financial regulator SEBI (Securities Exchange Board of India). Even though SEBI is confronted with numerous powers it is still observed that SEBI is unable to minimize or curb the violations which costs huge to investors and also to the whole economy. This study focuses on the numerous cases filed with SEBI which prove that SEBI needs to maintain much closer watch in the market. The main objectives of this work, taking 586 cases of SEBI rule violations for analysis, are to study various cases of SEBI rule violations in other than collective investment scheme, categorize these cases into six categories, to identify the most violated provision of Act with SEBI and to attempt to provide suggestions to minimize violation of SEBI norms. This study showed even though SEBI has numerous regulations and norms to monitor the market activities loopholes still remain which are being exploited by swindlers rendering the regulation of the capital market and protection of investor interests wanting.