Securities and Exchange Board of India Act, 1992

The Securities and Exchange Board of India Act, 1992 (Act No. 15 of 1992) is the parliamentary statute that constituted the Securities and Exchange Board of India (SEBI) as a statutory regulatory authority for the Indian securities market. Enacted on 4 April 1992 and brought into force with retrospective effect from 30 January 1992, the Act replaced the executive notification regime under which SEBI had operated since 12 April 1988 and conferred on the Board a tripartite mandate: to protect the interests of investors in securities, to promote the development of the securities market, and to regulate the securities market. The statute contains 35 substantive sections across seven chapters, together with later amendments that have progressively widened the Board’s investigative, adjudicatory, and recovery powers.

The Act drew its immediate political impetus from the securities scam disclosed in April 1992, in which trader Harshad Mehta exploited weaknesses in the banking and stock-market interface to divert an estimated Rs 4,025 crore. Although the Bill predated disclosure of the scam, parliamentary debate accelerated passage and the Joint Parliamentary Committee report of December 1993 endorsed the statutory regulator model. Subsequent amendments in 1995, 1999, 2002, 2013, 2014, and 2019 have transformed the Act into the principal legal foundation of the Indian capital market.

As of May 2026, the Act underpins more than 30 sets of subordinate regulations issued under Section 30, including the SEBI (Mutual Funds) Regulations, 1996, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the SEBI (Prohibition of Insider Trading) Regulations, 2015. It also defines the procedural relationship between SEBI, the Securities Appellate Tribunal (SAT), and the Supreme Court.

Background and legislative history

Pre-statutory regime, 1947 to 1988

For four decades after Independence, the principal instrument of capital-market regulation was the Capital Issues (Control) Act, 1947, administered by the Controller of Capital Issues in the Ministry of Finance. Secondary-market trading was regulated chiefly under the Securities Contracts (Regulation) Act, 1956, which conferred recognition powers over stock exchanges on the central government. Day-to-day market supervision was, in practice, devolved to the governing boards of the recognised exchanges themselves. By the mid-1980s, public issues were rationed by administrative fiat, insider trading was not statutorily defined, and there was no single regulator with cross-segment jurisdiction over primary issues, secondary trading, mutual funds, and intermediaries.

Non-statutory SEBI, 1988 to 1992

By a Government of India resolution dated 12 April 1988, SEBI was set up as a non-statutory body in the Ministry of Finance, headquartered in Bombay (now Mumbai). Without statutory powers, the Board could issue guidelines and recommend action to the central government, but it could not register intermediaries, levy penalties, or compel testimony. The Narasimham Committee on the Financial System (1991) recommended that SEBI be conferred statutory status as part of the broader programme of financial-sector liberalisation that followed the balance-of-payments crisis.

Harshad Mehta scam and parliamentary passage

In April 1992, the journalist Sucheta Dalal exposed the diversion of funds from the inter-bank ready-forward market into Bombay Stock Exchange equities through fictitious bank receipts. The episode triggered a 73-week inquiry by the Joint Parliamentary Committee on Irregularities in Securities and Banking Transactions (December 1993), whose recommendations were closely tracked by subsequent amendments. The text of the SEBI Bill, 1992, drew on earlier expert work including a 1990 report under Justice Ranganath Misra and a separate review by Justice D. P. Sodhi on the SCRA framework. The Bill was introduced in the Lok Sabha by then Finance Minister Manmohan Singh, passed in March 1992, and received presidential assent on 4 April 1992. Section 1(3) gave the statute retrospective effect from 30 January 1992, ensuring legal continuity for actions taken by the non-statutory Board in the intervening period.

Statutory structure of the Act

The Act is organised into seven chapters and a Schedule.

The preamble describes the Act as an instrument “to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market” (Securities and Exchange Board of India Act, 1992, Preamble). This tripartite mandate is reproduced verbatim in Section 11(1). The present statute has gaps in the section numbering that reflect successive amendments rather than missing content.

Establishment of SEBI as a statutory body

Sections 3 to 6 establish SEBI as a body corporate. Section 3 provides that the Board shall be a body corporate by the name of the Securities and Exchange Board of India, with perpetual succession and a common seal, power to acquire and dispose of property, and capacity to sue and be sued.

Section 4 prescribes the composition: a Chairman appointed by the central government; two members from officials of the Ministry of Finance; one member from officials of the Reserve Bank of India; and five other members appointed by the central government, of whom at least three shall be whole-time. Section 4(5) requires the Chairman and whole-time members to be persons of ability, integrity, and standing with special knowledge of law, finance, economics, accountancy, administration, or a related subject.

Section 5 fixes the term of office at five years, extendable once, with a mandatory retirement age of 65 for the Chairman and 62 for whole-time members. Section 6 sets out grounds for removal, including insolvency, conviction for an offence involving moral turpitude, incapacity, prejudicial financial interest, or abuse of position; removal requires a reasonable opportunity to be heard. The Board’s head office is at Mumbai, with regional offices at New Delhi, Kolkata, Chennai, and Ahmedabad.

Powers and functions

Section 11: principal mandate

Section 11 is the operative provision empowering SEBI to discharge its tripartite mandate. Section 11(1) restates the preamble. Section 11(2) enumerates twelve specific functions, which include:

• regulating the business in stock exchanges and other securities markets;
• registering and regulating intermediaries including stock brokers, share transfer agents, registrars to an issue, merchant bankers, underwriters, portfolio managers, and investment advisers;
• registering and regulating depositories, custodians, foreign portfolio investors, and credit rating agencies;
• registering and regulating venture capital funds and collective investment schemes, including mutual funds;
• prohibiting fraudulent and unfair trade practices and insider trading;
• regulating substantial acquisitions and the takeover of companies;
• calling for information from, inspecting, and auditing stock exchanges, mutual funds, intermediaries, and self-regulatory organisations.

Section 11(2A), inserted in 2002, empowers the Board to levy fees; Section 11(2)(ia), inserted in 2014, extends search-and-seizure powers.

Section 11A: power to issue regulations on issue of capital

Section 11A confers on SEBI explicit authority over matters relating to issue of capital, transfer of securities, and other matters incidental thereto, even in respect of companies whose securities are listed or proposed to be listed. The section consolidates rule-making powers that had previously been split between SEBI and the Department of Company Affairs.

Sections 11B, 11C, and 11D

Section 11B empowers the Board to issue such directions as it deems appropriate, in the interest of investors or for the orderly development of the securities market, to any person or class of persons associated with the securities market. The 2014 amendment inserted an explicit power to disgorge unlawful gains; Section 11B(2) was added to permit the Board, by reasoned order after inquiry, to levy a penalty.

Section 11C, inserted in 2002, empowers the Board to direct an investigating authority to investigate the affairs of any intermediary where the Board has reasonable grounds to believe that transactions are detrimental to investors or that the intermediary has violated the Act. The investigating authority may require attendance, production of records, and answers on oath; Section 11C(8) confers search-and-seizure powers exercisable with a magistrate’s warrant.

Section 11D, also inserted in 2002, empowers the Board to restrain by order any person from accessing the securities market and to prohibit dealings in securities, after providing a reasonable opportunity of hearing.

Penalties and adjudication

Chapter IV (Sections 15A to 15JB) sets out a graduated civil penalty regime. Each section deals with a specific category of contravention and prescribes a maximum penalty.

Section 15I provides the adjudicating-officer mechanism. The Board may appoint any officer not below the rank of Division Chief to hold an inquiry and impose a penalty. The 2014 amendment introduced a minimum penalty floor of Rs 1 lakh for many infractions. Section 15JA empowers SEBI to recover unpaid penalties as arrears of land revenue, and Section 15JB, inserted in 2014, provides for settlement of administrative and civil proceedings by consent order on payment of a settlement amount.

Securities Appellate Tribunal

Sections 15K to 15Y establish the Securities Appellate Tribunal (SAT) as the principal adjudicatory forum for appeals against SEBI orders. SAT was constituted by notification dated 14 July 1995 and began functioning from 7 December 1995.

Section 15K provides for the establishment of SAT, with a Presiding Officer (a sitting or retired judge of the Supreme Court or Chief Justice of a High Court) and two other members. Section 15L prescribes a five-year term, with retirement at 70 for the Presiding Officer and 67 for other members.

Section 15T confers appellate jurisdiction on SAT to entertain appeals against any order of SEBI under the Act or rules or regulations, any order of an adjudicating officer, and (after the Finance Act 2017) orders of IRDAI under the Insurance Act, 1938, and orders of PFRDA under the PFRDA Act, 2013. The appeal must be filed within 45 days of receipt of the impugned order; SAT may condone delay for sufficient cause. Section 15U provides that SAT is not bound by the Code of Civil Procedure but is guided by principles of natural justice, with civil-court powers of summoning, examination on oath, discovery, and production of documents.

Section 15Z provides for an appeal against an order of SAT to the Supreme Court of India on any question of law, within 60 days. The Supreme Court has, in a substantial body of case law since 1996, defined the scope of “question of law” narrowly to exclude factual re-appreciation.

Major amendments

Securities Laws (Amendment) Act, 1995

The 1995 amendment, brought into force on 25 January 1995, inserted Sections 11A and 15A to 15I, formalising the civil penalty and adjudication regime. Until then, contraventions of SEBI directions had been enforceable only through criminal prosecution under Section 24.

Securities Laws (Second Amendment) Act, 1999

The 1999 amendment, primarily focused on the Depositories Act, also extended SEBI’s jurisdiction over depository participants and dematerialised securities and made consequential changes to several SEBI Act provisions, including Section 11(2)(c) on registration of depositories.

Securities and Exchange Board of India (Amendment) Act, 2002

The 2002 amendment was a landmark expansion of SEBI’s powers. Principal changes included insertion of Section 11(2A) on fees and charges, Section 11C on investigation with powers of summons and access to records, Section 11D on restraint orders, enhanced penalty ceilings, and the new Sections 15HA (fraudulent and unfair trade practices) and 15HB (residual penalty). It also established SAT as a single national tribunal with three-member benches. The amendment was prompted by SEBI’s experience in the Ketan Parekh investigation, in which the Board found its powers to compel testimony and seize records inadequate.

Securities Laws (Amendment) Act, 2014

The 2014 Act, first promulgated through the Securities Laws (Amendment) Ordinance, 2013, conferred express jurisdiction over collective investment schemes of any size (closing the loophole exposed by the Sahara case), power to attach property of defaulters under Section 28A, express search-and-seizure powers under Section 11(2)(ia), power to call for information from any person or bank under Section 11(5), power to disgorge unlawful gains in addition to monetary penalty, and settlement of administrative and civil proceedings by consent order under Section 15JB.

Subsequent amendments

The Finance Act, 2017, expanded SAT’s jurisdiction to entertain appeals against orders of IRDAI and PFRDA. The Insolvency and Bankruptcy Code, 2016, made consequential amendments ensuring that SEBI and SAT proceedings continue notwithstanding a corporate insolvency resolution process. The Fugitive Economic Offenders Act, 2018, cross-references SEBI Act offences under Sections 12A and 24, enabling attachment of property of absconding accused. The Finance Act, 2019, strengthened the recovery framework under Section 28A and introduced Section 15HAA, penalising manipulation of price benchmarks.

Relationship with other statutes

Companies Act, 2013: Sections 24 and 458 delegate to SEBI the administration of provisions relating to issue and transfer of securities, prospectus, and listed-company disclosure. The Companies (Prospectus and Allotment of Securities) Rules, 2014, accordingly defer to SEBI regulations for listed companies.

Depositories Act, 1996: enacted to enable dematerialisation; SEBI is the principal regulator of depositories and depository participants. The 1999 amendment to the SEBI Act aligned definitions and registration requirements.

Securities Contracts (Regulation) Act, 1956: governs recognition of stock exchanges and listing of securities. The 1995 and 2002 amendments transferred most operational rule-making power from the central government to SEBI. SCRA Section 23 interfaces with SEBI Act Section 15HA for fraudulent trading violations.

Foreign Exchange Management Act, 1999: governs cross-border capital flows. SEBI co-regulates foreign portfolio investors and depository receipts in conjunction with the Reserve Bank of India. The SEBI (Foreign Portfolio Investors) Regulations, 2019, are framed under Section 11 of the SEBI Act and refer extensively to FEMA notifications.

Prevention of Money Laundering Act, 2002: designates SEBI as a regulator for customer due-diligence by registered intermediaries. Intermediary KYC norms issued under Section 11 are framed in conjunction with PMLA Rules, 2005, and are enforced through SEBI inspections referenced in the SEBI mutual-fund compliance audit framework.

Enforcement record

Harshad Mehta and the 1992 securities scam

Post-1992 enforcement under the Act yielded a series of orders against banks, brokers, and listed companies arising from the 1992 scam. The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, established a dedicated forum for civil and criminal matters, working in parallel with SEBI’s administrative proceedings.

Ketan Parekh ban, 2001

In December 2001, SEBI debarred broker Ketan Parekh and entities controlled by him from accessing the securities market for 14 years, on findings of price manipulation in scrips including Himachal Futuristic Communications, Global Tele-Systems, and Zee Telefilms. The order, upheld by SAT in modified form, was a defining application of Sections 11 and 11B.

Sahara, 2012 Supreme Court judgment

In Sahara India Real Estate Corporation Ltd. v. Securities and Exchange Board of India (2012) 10 SCC 603, the Supreme Court upheld SEBI’s jurisdiction over hybrid instruments issued by two Sahara group companies to nearly three crore investors, treating them as deemed public issues under Section 67(3) of the Companies Act, 1956, and Section 11A of the SEBI Act. The judgment ordered refund of approximately Rs 24,000 crore with 15 per cent interest and validated SEBI’s authority over collective fund mobilisation outside the listed-company perimeter.

NSE co-location and Adani-Hindenburg

In April 2019, SEBI issued orders in the NSE co-location matter, finding that the exchange’s tick-by-tick data dissemination architecture had given preferential access to certain algorithmic trading members between 2010 and 2014. NSE was directed to disgorge Rs 624.89 crore with 12 per cent interest. Following the Hindenburg Research report of 24 January 2023, SEBI initiated investigation into 24 matters concerning the Adani group under Sections 11 and 11C. The Supreme Court, in Vishal Tiwari v. Union of India (judgment dated 3 January 2024), reviewed SEBI’s investigative progress and constituted an expert committee, but declined to transfer the investigation outside SEBI.

Mutual fund context

The Act provides the principal statutory basis for the regulation of mutual funds in India. Section 11(2)(c) empowers SEBI to register and regulate mutual funds; Section 30 confers rule-making power exercised through the SEBI (Mutual Funds) Regulations, 1996. The penalty regime under Sections 15D and 15E applies specifically to mutual funds and asset management companies, with penalties of Rs 1 lakh per day rising to Rs 1 crore for sustained default.

The Act also underpins the regulation of Unit Trust of India, which was brought within the SEBI framework following the 2003 dissolution of the UTI 1963 statute. The earlier UTI US-64 crisis of 2001 was a direct policy trigger for tightening trustee obligations under the 1996 Regulations and for inserting express investigation powers under Section 11C of the parent Act. The history of mutual funds in India since 1963 traces a progression from a single statutory body to an industry of more than 44 asset management companies. The Association of Mutual Funds in India (AMFI) is recognised as a self-regulatory organisation under Section 11(2)(e).

Specific mutual-fund frameworks anchored to the Act include the SEBI investor charter for mutual funds, the side-pocketing rules for debt mutual funds, and the SEBI mutual-fund stress-testing framework of 2024. Enforcement actions against registrar and transfer agents, such as the Karvy pledge misuse case of 2019, have been adjudicated under Sections 11, 11B, and 15HA of the Act.

Recent regulatory expansions

REITs, InvITs, and AIFs

The SEBI (Real Estate Investment Trusts) Regulations, 2014, and the SEBI (Infrastructure Investment Trusts) Regulations, 2014, were framed under Section 30. Subsequent amendments have widened sponsor eligibility, reduced minimum investment thresholds, and introduced fractional-ownership product structures (Small and Medium REITs) under 2024 amendments. The SEBI (Alternative Investment Funds) Regulations, 2012, classify AIFs into three categories; Section 11(2)(c), as amended in 2013, expressly covers AIFs. The 2024 amendments tightened due-diligence and disclosure requirements following observed misuse of AIF structures for evergreening of bank loans.

Finance Act 2024 and crypto-asset ambiguity

The Finance (No. 2) Act, 2024, made consequential amendments to Section 15HAA and Section 28A on benchmark manipulation and recovery. Virtual digital assets are not “securities” within the meaning of Section 2(h) of the Securities Contracts (Regulation) Act, 1956, or Section 11 of the SEBI Act, except insofar as they are issued as tokenised securities or backed by securities. The regulatory perimeter is presently under inter-ministerial review.

Criticism and debates

Over-regulation concerns

Industry submissions to the Standing Committee on Finance have argued that SEBI’s circular-driven rule-making, often involving short consultation windows, produces compliance burdens disproportionate to investor-protection gains. The proliferation of master circulars, of which the SEBI mutual-fund compliance audit framework is one operational example, illustrates the volume of subordinate regulation under the Act.

Jurisdictional overlaps

Coordination between SEBI and the RBI on debt-market regulation has been a recurring source of friction, most prominently in the long-running dispute over G-Sec listing on stock exchanges (resolved by an inter-regulatory working group in 2018). The High Level Coordination Committee on Financial Markets provides the principal forum for resolution. Insurance-linked products, particularly Unit-Linked Insurance Plans, generated a public turf battle in April 2010, when SEBI banned 14 life insurers from selling ULIPs as unregistered collective investment schemes. The dispute was resolved by a presidential ordinance affirming IRDAI’s exclusive jurisdiction; ULIP-marketed products remain outside SEBI’s perimeter despite their economic similarity to mutual funds.

Delayed enforcement and cross-border reach

The duration of SEBI investigations, often three to five years from event to final order, has been the subject of judicial comment. In SEBI v. Mega Corporation, the Supreme Court observed that regulatory delay erodes deterrence and directed SEBI to publish indicative timelines for investigations and adjudication. The Act’s territorial reach is limited by general principles of jurisdiction; offshore intermediaries are reached through indirect means including the SEBI (Foreign Portfolio Investors) Regulations, 2019, beneficial-ownership disclosure rules, and the IOSCO Multilateral Memorandum of Understanding, to which SEBI became a full signatory in 2003.

See also

• SEBI (Mutual Funds) Regulations, 1996
• SEBI Investment Management Department
• Mutual fund industry in India
• History of mutual funds in India
• Unit Trust of India
• UTI US-64 crisis of 2001
• AMFI, Association of Mutual Funds in India
• Side-pocketing for debt mutual funds
• SEBI investor charter for mutual funds
• SEBI mutual-fund compliance audit
• SEBI mutual-fund stress testing 2024
• Karvy RTA pledge misuse case 2019
• Reserve Bank of India

References

1. Securities and Exchange Board of India Act, 1992 (Act No. 15 of 1992), Gazette of India Extraordinary, Part II, Section 1, 4 April 1992.
2. Securities Laws (Amendment) Act, 1995 (Act No. 9 of 1995).
3. Securities and Exchange Board of India (Amendment) Act, 2002 (Act No. 59 of 2002).
4. Securities Laws (Amendment) Act, 2014 (Act No. 27 of 2014).
5. Finance Act, 2017, Chapter VI, Part XIV (amendments to the SEBI Act).
6. Finance Act, 2019, Section 173 (insertion of Section 15HAA).
7. Joint Parliamentary Committee on Irregularities in Securities and Banking Transactions, Report, December 1993, Lok Sabha Secretariat.
8. Narasimham Committee on the Financial System, Report, November 1991, Reserve Bank of India.
9. Sahara India Real Estate Corporation Ltd. v. Securities and Exchange Board of India, (2012) 10 SCC 603.
10. Vishal Tiwari v. Union of India, Writ Petition (Civil) No. 162 of 2023, Supreme Court of India, judgment dated 3 January 2024.
11. SEBI Annual Report 2022 to 23, Securities and Exchange Board of India, Mumbai, August 2023.
12. SEBI Order in re NSE Co-location, WTM/GM/EFD/60/2018 to 19, 30 April 2019.