Which of the following pairs is correctly matched?

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Promotion of fair practices and code of conduct in the securities market – Protective function

Option (1) Controlling insider trading and imposing penalties for such practices – Regulatory function — Incorrect. Insider trading hurts ordinary investors. Controlling it and punishing it is a protective function.

Option (2) Promotion of fair practices and code of conduct in the securities market – Protective function — Correct. A fair market with a code of conduct keeps investors from being cheated. So it is a protective function.

Option (3) Levying fee or other charges for carrying out the purposes of the Act – Development function — Incorrect. Collecting fees helps SEBI do its work under the Act. It is a regulatory function.

Option (4) Registration of brokers and sub-brokers – Development function — Incorrect. Registering brokers brings them under SEBI’s rules. It is a regulatory function.

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.
2. Controlling insider trading and imposing penalties for such practices.
3. Undertaking steps for investor protection.
4. Promotion of fair practices and code of conduct in securities market.”