Business StudiesFinancial Markets

Which of the following is NOT a regulatory function of SEBI?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Prohibition of fraudulent and unfair trade practices like making misleading statements

Option (1) Registration of brokers and sub-brokers and other players in the market — Regulatory function. It is the first regulatory function of SEBI. SEBI registers brokers, sub-brokers and other market players.

Option (2) Regulation of takeover bids by companies — Regulatory function. SEBI controls the bids that companies make to take over other companies.

Option (3) Levying fee or other charges for carrying out the purposes of the Act — Regulatory function. SEBI collects fees and charges to carry out the purposes of the Act.

Option (4) Prohibition of fraudulent and unfair trade practices like making misleading statements — Not a regulatory function. It is the first protective function of SEBI. It guards investors against misleading statements, manipulations and price rigging.

NCERT (Pre-rationalised Edition): “Regulatory Functions 1. Registration of brokers and sub-brokers and other players in the market.
2. Registration of collective investment schemes and Mutual Funds.
3. Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers and the business in stock exchanges and any other securities market.
4. Regulation of takeover bids by companies.
5. Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
6. Levying fee or other charges for carrying out the purposes of the Act.”

“Protective Functions 1. Prohibition of fraudulent and unfair trade practices like making misleading statements, manipulations, price rigging etc.”