Advantages and Disadvantages of SEBI

In 1988, the Securities and Exchange Board of India (SEBI) was established to regulate the securities market's activities. It encourages the stock market to develop in an orderly and healthy manner. However, SEBI did not previously have total authority over stock market transactions. It was merely left as a watchdog to keep an eye on things but was powerless to control or regulate them. Because of this, SEBI received legal character in May 1992 and is now a body corporate with a distinct legal existence and perpetual succession.

As the volume of stock market transactions increased, so did the number of stock market frauds, including price rigging, share delivery delays, and violations of stock exchange laws and regulations. The existence of these unethical actions caused customers to lose trust and confidence in the stock market. As a result, the Indian government decided to create SEBI, a regulating body or agency.

Goals and Functions of SEBI

The major goal of SEBI's establishment was to prevent fraud and safeguard investors' interests. Simply put, SEBI was established to meet the demands of three groups:

• Issuers: For issuers, SEBI offers a marketplace where companies can quickly and fairly raise capital.
• Investors: Investors are protected by SEBI, which also gives factual information.
• Intermediaries: For intermediaries, SEBI offers a competitive professional market.

Purpose of SEBI

The ultimate purposes of SEBI are to safeguard investor interests, advance stock exchange development, and control stock market activity. The following are the main objectives of SEBI:

• Control over stock market activity.
• Security of investors' investments and protection of investors' rights.
• By striking a balance between a company's internal regulations and statutory requirements, fraud and malpractice can be avoided.
• Intermediaries like underwriters, brokers, etc. should be governed and given a code of behaviour.

Powers of SEBI

• The SEBI has the authority to control and approve any laws about activities in the stock markets.
• It can arrange for regular checks and returns into the operations of the stock exchanges and has the authority to access the books of records and accounts for all stock exchanges.
• If any misconduct on the stock exchanges is discovered, it may also hold hearings and render verdicts.
• It has the authority to have businesses listed on and delisted from any domestic stock exchange when it comes to how they are treated.

Advantages of SEBI

1. Short-term likelihood of increased returns

Compared to other investment options like PPF and fixed deposits, investing in the stock market has the potential to produce higher inflation-beating returns in a shorter amount of time. By sticking to the fundamentals of the stock market, such as planning the trade and conducting due diligence, people can significantly increase their chances of securing superior returns.

2. Purchased stock in the listed company and became a shareholder

Regardless of how few shares you purchase, you gain proportionate power over the company's stakes the instant you do.

3. Unparalleled liquidity

Stock investing offers a level of liquidity that is practically unmatched compared to other investment strategies. Of course, investors can quickly determine whether to buy or sell a security. People can always sell their shares and get access to the cash if they need a quick flush of liquidity.

4. A regulatory agency that protects the interests of the public

India's Securities and Exchange Board controls and oversees the stock market. The responsibility of SEBI is to oversee all developments and protect the interests of all parties. Again, this goes a long way toward protecting their interests in the face of any fraudulent behaviour or business, for that matter.

Disadvantages of SEBI

1. Volatility risks are rising

Investment in equities entails its risks because of how volatile and dynamic markets are. Within a single day, share prices frequently experience peaks and troughs. Although the odds of a major failure are few, it can take years for the market to recover from the worst effects of a crisis. These swings are frequently unpredictable and can, as a result, put assets at risk.

2. The profit margins can be eroded by the brokerage

An investor must pay the broker a set percentage of the purchase price or sale price of each share they choose to buy or sell. Profitability could thus be put in danger.