The basic purpose of SEBI is to create an environment to facilitate _…

The basic purpose of SEBI is to create an environment to facilitate __________ through the securities markets.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → efficient mobilisation and allocation of resources

Option (1) efficient pricing and valuation of securities — Incorrect. Fixing a fair price for securities through demand and supply is a function of a stock exchange.

Option (2) efficient mobilisation and allocation of resources — Correct. SEBI’s basic purpose is a good environment in which savings are gathered and put to the right use through the securities markets. Mobilisation means collecting funds; allocation means sending them where they are needed.

Option (3) wider share ownership and an equity cult — Incorrect. Spreading the equity cult among people is a function of a stock exchange.

Option (4) a continuous market for existing securities — Incorrect. A ready and continuous market for existing securities is given by a stock exchange.

NCERT (Pre-rationalised Edition): “Purpose and Role of SEBI The basic purpose of SEBI is to create an environment to facilitate efficient mobilisation and allocation of resources through the securities markets. It also aims to stimulate competition and encourage innovation. This environment includes rules and regulations, institutions and their interrelationships, instruments, practices, infrastructure and policy framework.
This environment aims at meeting the needs of the three groups which basically constitute the market, viz, the issuers of securities (Companies), the investors and the market intermediaries.
• To the issuers, it aims to provide a market place in which they can confidently look forward to raising finances they need in an easy, fair and efficient manner.
• To the investors, it should provide protection of their rights and interests through adequate, accurate and authentic information and disclosure of information on a continuous basis.
• To the intermediaries, it should offer a competitive, professionalised and expanding market with adequate and efficient infrastructure so that they are able to render better service to the investors and issuers. …”