The protective function of SEBI is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Controlling insider trading
SEBI has three groups of functions. Protective functions guard investors against unfair practices. Developmental functions build up the securities market. Regulatory functions frame rules and check that the market follows them.
Option (1) Regulation of takeover bids by companies — Incorrect. This is a regulatory function.
Option (2) Training of intermediaries of the securities market — Incorrect. This is a developmental function.
Option (3) Controlling insider trading — Correct. Insider trading means buying or selling securities by people who have price-sensitive information that the public does not have. It cheats ordinary investors, so controlling it and imposing penalties is a protective function.
Option (4) Calling for information by undertaking inspection and conducting audits of stock exchanges — Incorrect. This is a regulatory 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): “Protective Functions 1. Prohibition of fraudulent and unfair trade practices like making misleading statements, manipulations, price rigging etc. |