Financial Market Reforms: SEBI, Capital Markets, and Investors

TOPIC CLASSIFICATION

Subject: Indian Economy Sub-area: Financial Markets — Capital Market, SEBI, Reforms Difficulty: Medium Weightage: Moderate (1–2 Prelims + occasional Mains)

EXAMINER REASONING

1. Trap: Thinking SEBI controls all financial markets (it regulates securities markets — IRDAI regulates insurance, RBI regulates banking).
2. Most confused: Primary market vs Secondary market — definitions and regulatory regimes.
3. Key anchor: SEBI Act, 1992 — statutory status (SEBI existed as non-statutory body since 1988).
4. Current affairs hook: Retail investor surge (Demat accounts crossed 17 crore in 2025); SEBI's F&O consultation paper (2024); SME IPOs and manipulation concerns.
5. Mains hinge: "SEBI has transformed India's capital markets from a curb market to a world-class regulator. Assess its role in investor protection."

Core Concept

Evolution of Capital Market Reforms

1. Pre-1991: Administered — CCI (Controller of Capital Issues) determined pricing and timing of IPOs
2. 1992 Reforms: SEBI established as statutory regulator; CCI abolished; free pricing of IPOs
3. 1994–2000: NSE established (electronic trading); depository system (NSDL/CDSL); Rolling settlement (T+3)
4. 2000–2010: Demat mandatory; Insider trading regulations; Takeover code; ASBA introduced
5. 2010–2020: REITs/InvITs; T+2 settlement; IFSC at GIFT City
6. 2020–Present: T+1 settlement; retail participation surge; F&O regulation tightening

SEBI — Powers & Functions

• Quasi-legislative: Makes regulations (e.g., Insider Trading Regulations, Takeover Code)
• Quasi-executive: Investigates, imposes penalties, adjudicates
• Quasi-judicial: Passes orders, appoints SAT for appeals

Key Reforms