The promoters of a listed company spread false news about a big export order so that the price of its shares goes up. SEBI takes action against the promoters. Which function of SEBI is at work here?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Prohibition of fraudulent and unfair trade practices
Option (1) Prohibition of fraudulent and unfair trade practices — Correct. Spreading false news to push up the share price is a misleading statement and price rigging. SEBI stops such fraud to protect investors. This is a protective function.
Option (2) Regulation of takeover bids by companies — Incorrect. This regulatory function covers a company bidding to take control of another. No takeover bid is made here.
Option (3) Conducting research and publishing information useful to all market participants — Incorrect. This is a development function that helps the market grow. Here SEBI is acting against a wrong.
Option (4) Registration of brokers and sub-brokers and other players in the market — Incorrect. This regulatory function brings market players under SEBI’s rules. The promoters are not being registered; they are being punished.
NCERT (Pre-rationalised Edition): “Regulatory Functions 1. Registration of brokers and sub-brokers and other players in the market. “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.” |