Which of the following is NOT a Regulatory Function of SEBI?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Controlling insider trading and imposing penalties.
SEBI’s functions fall into three groups. Regulatory functions set the rules and register the players. Development functions help the market grow. Protective functions guard investors against unfair practices.
Option (1) Registration of brokers and sub-brokers. — A regulatory function of SEBI (Incorrect). Brokers and sub-brokers cannot trade until SEBI registers them.
Option (2) Controlling insider trading and imposing penalties. — Not a regulatory function of SEBI (Correct). Insider trading is dealing in shares using company information that the public does not have. Controlling it protects ordinary investors, so it is a protective function.
Option (3) Registration of Collective investment schemes and Mutual Funds. — A regulatory function of SEBI (Incorrect). Mutual funds and collective investment schemes must be registered with SEBI.
Option (4) Levying fee or other charges for carrying out the purposes of the Act. — A regulatory function of SEBI (Incorrect). The Act lets SEBI charge fees to carry out its work.
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. 2. Controlling insider trading and imposing penalties for such practices.” “Regulatory Functions 1. Registration of brokers and sub-brokers and other players in the market. |