Securities Law · In ForceAct No. 15 of 1992Effective 30 January 1992

Securities and Exchange Board of India Act

SEBI Act 1992 · India's Capital Markets Regulator

Establishes SEBI as the statutory regulator for securities markets in India. Grants wide powers to investigate market manipulation, insider trading, and fraud; impose penalties; issue cease-and-desist orders; and prosecute offenders. Works alongside SCRA 1956, Depositories Act 1996, and an extensive body of SEBI Regulations.

35+

Act Sections

10+

Key Regulations

SAT

Appellate Body

₹25 Cr / 3x

Max Penalty

SEBI Enforcement Powers

Investigation

S.11C — Call for records, examine persons, impound documents, conduct search and seizure with SEBI officer

Adjudication

S.15A–15HB — Adjudicating Officer imposes monetary penalty. Appeals lie to Securities Appellate Tribunal (SAT)

Prosecution

S.24 — Criminal prosecution for non-compliance. Up to 10 years imprisonment. No court below Session Court takes cognizance

Disgorgement

S.11B(1A) — Disgorge ill-gotten gains in addition to penalty. Critical in insider trading and front-running cases

Key Sections — SEBI Act

Most frequently invoked in enforcement and advisory work

S. 2

Definitions

Key definitions in the SEBI Act: 'Board' means SEBI itself. 'Securities' includes shares, scrip, stocks, bonds, debentures, and rights or interests in securities (per SCRA 1956). 'Intermediary' covers brokers, sub-brokers, bankers to an issue, trustees, portfolio managers, investment advisers, depositories, depository participants, custodians, foreign institutional investors, credit rating agencies. 'Stock exchange' includes NSE, BSE, MCX, etc.

S. 3

Establishment and incorporation of Board

SEBI was established as a statutory body by the SEBI Act, 1992. It is a body corporate with perpetual succession and can sue and be sued. Its head office is in Mumbai. SEBI was initially a non-statutory body set up by the Government of India in 1988; it became a statutory body on 12 April 1992. SEBI has regional offices across India, including a Northern Regional Office in Delhi.

S. 4

Management of Board

SEBI is governed by a Board of eight members: a Chairman (appointed by the Central Government), two Finance Ministry nominees, one RBI nominee, and five other members (at least three full-time). The Chairman is the chief executive. The Board meets regularly to set policy, approve regulations, and adjudicate major enforcement matters.

S. 11

Functions and powers of Board

Section 11 is the omnibus powers provision. SEBI has three core mandates: (1) investor protection, (2) market development, and (3) securities market regulation. SEBI regulates all intermediaries, prohibits insider trading and fraudulent trade practices, regulates takeovers, can audit exchanges and mutual funds, and can demand records from banks and government bodies. These broad powers are the foundation of all SEBI enforcement action.

S. 11A

Power to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities

SEBI regulates all public issues of securities. Any IPO, FPO, rights issue, or other public offer requires compliance with SEBI's ICDR Regulations. SEBI can prohibit any issue if it is against investor interest. This is the basis for SEBI reviewing Draft Red Herring Prospectuses (DRHPs) before companies list.

S. 11B

Power of Board to issue directions

This is SEBI's enforcement tool. After an inquiry, SEBI can issue binding directions to any market participant, company, or intermediary — including directions to freeze accounts, debar from markets, recall public deposits, or restrain trading. Section 11B orders are SEBI's most commonly invoked enforcement powers and are quasi-judicial in nature.

S. 11C

Investigation

SEBI can appoint an Investigating Authority to investigate any market participant or intermediary if there is reason to believe violations have occurred. Investigations typically involve examining books, trading records, communications, and bank accounts. Persons under investigation must cooperate — failure to do so is itself a violation.

S. 12

Registration of stock brokers, sub-brokers, share transfer agents and others

All market intermediaries must be registered with SEBI. No one can function as a broker, merchant banker, investment adviser, portfolio manager, FII, custodian, depository, or credit rating agency without SEBI registration. Operating without registration is an offence under Section 24 and attracts penalties under Section 15A.

S. 12A

Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition

Section 12A is the cornerstone anti-fraud and market integrity provision. It prohibits: fraudulent trading schemes, manipulative devices, insider trading, dealing on unpublished price-sensitive information (UPSI), tipping others with UPSI, and acquiring control without making a mandatory open offer (Takeover Code). Most SEBI enforcement orders cite Section 12A read with the relevant regulations.

S. 15A

Penalty for failure to furnish information, return, etc.

Failure to submit mandatory disclosures or maintain records: penalty starts at INR 1 lakh per day of non-compliance, capped at INR 1 crore. Failure to maintain books of account: up to INR 10 lakh. These penalties apply to listed companies failing LODR compliance, intermediaries failing to file required reports, and insiders failing to disclose trading.

S. 15B

Penalty for failure by any person to enter into an agreement with clients

Every SEBI-registered intermediary must execute a formal client agreement before providing services. Failure to do so attracts penalties of INR 1 lakh per day up to INR 1 crore. This is particularly relevant for brokers, investment advisers, and portfolio managers.

S. 15G

Penalty for insider trading

Insider trading penalty: minimum INR 10 lakh, maximum INR 25 crore or 3x profits — whichever is higher. This applies to: (1) trading on UPSI, (2) tipping others with UPSI, and (3) procuring others to trade on UPSI. SEBI has been aggressively enforcing this provision; penalties in large cases have run into tens of crores.

S. 15H

Penalty for non-disclosure

Failure to make mandatory shareholding disclosures (under the Takeover Code or LODR) attracts a penalty of INR 25 crore or 3x profits — whichever is higher. This applies to acquirers crossing disclosure thresholds (5%, 10%, 25% etc.) without filing, and to promoters failing to disclose encumbrance.

S. 15I

Power to adjudicate

SEBI appoints an Adjudicating Officer (AO) to conduct penalty proceedings. The AO is a quasi-judicial authority who must give the accused a hearing before imposing penalties. AO orders can be appealed to SAT. The adjudication process is separate from criminal prosecution under Section 24.

S. 15J

Factors to be taken into account by the adjudicating officer

The AO must consider three factors in setting penalty: (1) unfair profits made, (2) investor losses caused, and (3) whether the violation is repeat conduct. These factors can both increase and decrease penalty. Well-crafted submissions at the AO stage focusing on absence of gain, investor harm, and first-time offence can significantly reduce penalties.

S. 15U

Establishment of Securities Appellate Tribunal

SAT (Securities Appellate Tribunal) is the appellate body for SEBI orders. Any order passed by SEBI (adjudication order, direction under 11B, disgorgement order) can be challenged at SAT. SAT is headed by a Presiding Officer (typically a retired Supreme Court or High Court judge). SAT is in Mumbai. SAT orders can be appealed to the Supreme Court on questions of law.

S. 15Z

Appeal to Supreme Court

SAT orders can be appealed to the Supreme Court within 60 days, but only on questions of law — not facts. The Supreme Court can condone delay for sufficient cause. The appeal chain for SEBI matters is: SEBI order → SAT → Supreme Court.

S. 19

Power to delegate

SEBI can delegate its powers to its officers or other persons. This is how SEBI's Adjudicating Officers, Whole-Time Members, and officials at Regional Offices exercise enforcement powers. Delegated powers are subject to conditions specified in the delegation order.

S. 24

Offences

SEBI Act violations can result in criminal prosecution independent of civil penalties. The maximum criminal punishment is 10 years imprisonment and/or INR 25 crore fine. Failure to comply with SEBI's directions or pay adjudication penalties: minimum 1 month imprisonment, up to 3 years and INR 25 crore fine. Criminal cases are tried by designated courts.

Key SEBI Regulations

Delegated legislation under SEBI Act governing specific market segments

2015

SEBI (Listing Obligations and Disclosure Requirements) Regulations

The LODR Regulations govern the ongoing compliance and disclosure obligations of companies whose securities are listed on recognised stock exchanges in India. They replaced the erstwhile Equity Listing Agreement and Debt Listing Agreement. LODR is the primary compliance framework for all NSE/BSE-listed companies.

—Regulation 4 — Principles governing disclosures and obligations
—Regulation 7 — Share Transfer Agent (RTA) appointment
—Regulation 13 — Grievance Redressal Mechanism (SCORES)

2018

SEBI (Issue of Capital and Disclosure Requirements) Regulations

ICDR Regulations govern all public and rights issues of securities by listed and unlisted companies, including IPOs, FPOs, rights issues, bonus issues, and preferential allotments. They specify eligibility criteria, disclosure requirements in offer documents, and post-issue obligations.

—Chapter II — Public Issue — eligibility criteria for IPO (3 years profitability track record or net tangible assets of INR 3 crore, or route via institutional investors/anchor investors)
—Regulation 6 — Conditions for IPO — not barred by SEBI/court order, no FEMA default etc.
—Regulation 7 — Promoter holding lock-in — 3 years for minimum promoter contribution; 1 year for excess holdings

2011

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations

The Takeover Code (informally called 'SEBI Takeover Regulations' or 'SAST Regulations') governs acquisitions of shares and control in listed companies. It mandates public announcements (open offers) when acquirers cross specified shareholding thresholds, ensuring minority shareholders have an exit at a fair price.

—Regulation 3 — Disclosure obligations — acquisition of 5% or more; and every acquisition/disposal exceeding 2% beyond 5% threshold
—Regulation 6 — Creeping acquisition — acquirers holding 25% or more can acquire up to 5% additional per financial year without triggering open offer
—Regulation 7 — Mandatory open offer — triggered when acquirer acquires 25% or more of voting rights; or acquires control

2015

SEBI (Prohibition of Insider Trading) Regulations

The PIT Regulations prohibit trading in securities while in possession of Unpublished Price Sensitive Information (UPSI) and impose a comprehensive compliance framework on listed companies including trading plans, insider lists, and trading windows.

—Regulation 2(g) — Definition of 'insider' — any person with UPSI, including directors, employees, auditors, advisers, and their connected persons
—Regulation 2(n) — Definition of 'unpublished price sensitive information' (UPSI) — financial results, dividends, M&A, board changes, listing/delisting, litigation that may affect price
—Regulation 3 — Prohibition on communication of UPSI — except on need-to-know basis

2018

SEBI (Buy-back of Securities) Regulations

These regulations govern the repurchase by listed companies of their own shares or other specified securities. Buy-backs can improve EPS, return cash to shareholders, and signal management confidence. The regulations prescribe eligibility, limits, methods, and post-buyback obligations.

—Regulation 4 — Conditions for buy-back — board approval for up to 10% of paid-up capital + free reserves in a financial year; shareholder approval (special resolution) for above 10% up to 25%
—Regulation 5 — Limits — maximum 25% of paid-up capital and free reserves in a financial year
—Regulation 6 — Debt-equity ratio — post buy-back ratio cannot exceed 2:1

2012

SEBI (Alternative Investment Funds) Regulations

AIF Regulations govern privately pooled investment vehicles (other than mutual funds and collective investment schemes) that invest in accordance with a defined investment policy. AIFs include private equity funds, venture capital funds, hedge funds, and infrastructure funds. Three categories exist based on leverage and strategy.

—Regulation 2(b) — Definition of AIF — any fund established or incorporated in India as a trust, company, LLP, or body corporate that is a privately pooled investment vehicle
—Regulation 3 — Mandatory registration with SEBI before raising funds
—Category I AIF — Venture capital funds, SME funds, social venture funds, infrastructure funds — eligible for government incentives

1996

SEBI (Venture Capital Funds) Regulations

The old VCF Regulations governed venture capital funds before the AIF Regulations were introduced. Existing VCFs registered under the 1996 Regulations were grandfathered; new registrations are now under AIF Regulations (Category I). The 1996 Regulations remain technically in force for grandfathered funds.

—Definition of venture capital fund — a fund established in the form of a trust or a company including a body corporate, and registered with SEBI
—Minimum investment — INR 5 lakh per investor (grandfathered threshold, much lower than AIF)
—Investment conditions — at least 66.67% in unlisted equity/equity-linked instruments

1996

SEBI (Mutual Funds) Regulations

The MF Regulations govern the establishment, registration, and operation of mutual funds in India. All mutual funds must be registered with SEBI. A mutual fund is constituted as a trust with a sponsor, trustee, and an AMC (Asset Management Company). The regulations cover all aspects from scheme launch to investor protection.

—Regulation 7 — Trustee obligations — trustees oversee AMC and protect investor interests
—Regulation 24 — AMC responsibilities — must have networth of INR 50 crore
—Regulation 29 — Scheme launch — new fund offer (NFO) requirements, offer document

2020

SEBI (Portfolio Managers) Regulations

Portfolio Manager Regulations govern entities that manage individual investors' portfolios of securities. Portfolio managers provide discretionary or non-discretionary investment management services, typically to HNIs and institutions. The 2020 regulations replaced the 1993 Regulations with significantly enhanced requirements.

—Regulation 3 — Mandatory registration with SEBI before providing portfolio management services
—Regulation 6 — Eligibility — minimum networth of INR 5 crore (increased from INR 2 crore)
—Regulation 10 — Minimum investment amount per client — INR 50 lakh (increased from INR 25 lakh)

2008

SEBI (Intermediaries) Regulations

These regulations provide the overarching framework for registration, conduct, and disciplinary proceedings for all classes of SEBI-registered intermediaries, including brokers, merchant bankers, investment advisers, and others. They establish common obligations applicable to all intermediaries regardless of specific category regulations.

—Regulation 3 — Application for registration — Form A, applicable fee, fit and proper criteria
—Regulation 5 — Fit and proper person criteria — financial soundness, reputation, competence, SCORES complaints history
—Regulation 7 — Conditions of registration — maintain books, report to SEBI, maintain standards

Need Legal Advice?

Our team advises on matters arising under this legislation.

SEBI Regulatory Compliance IPO and Capital Markets AIF and PMS Fund Formation

Schedule a Consultation

SEBI enforcement actions, SAT appeals, insider trading investigations, and capital market regulatory advisory are core practice areas at Corpus Juris Legal. We appear before SEBI adjudicating officers, SAT, and the Supreme Court in securities law matters.

Free Consultation ← All Acts