The following is the Protective Function of SEBI:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Controlling insider trading and imposing penalties for such practices.
SEBI’s functions fall into three groups. Protective functions guard the interest of investors. Regulatory functions lay down rules for the market. Development functions help the market grow.
Option (1) Regulating the takeover bids by companies. — Incorrect. This is a regulatory function.
Option (2) Controlling insider trading and imposing penalties for such practices. — Correct. Insider trading means buying or selling shares by people who have secret information about the company. It cheats ordinary investors, so stopping it is a protective function.
Option (3) Training of intermediaries of the securities market. — Incorrect. This is a development function.
Option (4) Conducting research and publishing information useful to all market participants. — Incorrect. This is also a development function.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below.
NCERT (Pre-rationalised Edition): “Regulatory Functions … 4. Regulation of takeover bids by companies.” “Development Functions 1. Training of intermediaries of the securities market. “Protective Functions 1. Prohibition of fraudulent and unfair trade practices like making misleading statements, manipulations, price rigging etc. |