Capital Market Regulators: The capital market is an important part of the Indian economy which provides individuals a platform to buy and sell securities such as bonds, shares, etc.
It is the key to economic growth as it helps in the mobilization of resources, allocation of funds, and helping investors in increasing their capital.
It has also faced a number of fraudulent activities over the years which have been reduced due to the revolutionization and regulations that have come with it.
But the capital market needs some regulating body behind it that can enable its operations in a transparent manner. This is where the capital market regulators come into the picture.
In this article, we will be discussing capital market regulators in India.
What Is The Capital Market In India?
The Capital Market is a marketplace that acts as a common platform where investments and savings are channeled between suppliers and those who need it.
The suppliers referred to here are the parties who are willing to lend their capital or invest it into parties who are in need of such loans.
These suppliers include investors and banks and the ones who are in need of this capital will be companies, governments, and the general public looking for funds.
Technically speaking, it is a place where buyers and sellers of financial securities gather to engage in trading these securities. Institutions and individuals both are part of the trading process.
The two most well-known capital markets are the stock market and the bond market. Now that we have understood the meaning of the capital market. Let us now discuss the capital market regulators.
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Capital Market Regulators
Capital market regulators are independent organizations or government agencies that are responsible for administrating the operations of capital markets within the country. Their main aim is to protect investors and maintain the integrity of the markets.
This is by implementing laws and regulations that govern the buying and selling of securities as they do this by enforcing laws and regulations that govern the buying and selling of securities, as well as keeping an eye on market activity to detect and prevent fraud and manipulation.
The Capital market regulators in India are:
The Ministry Of Finance
The Ministry of Finance operates through the Department of Economic Affairs – Capital Markets Division.
The division is in charge of formulating the policies related to the orderly growth and development of the securities markets (i.e. share, debt, and derivatives) as well as safeguarding the interest of the investors.
It is primarily responsible for building regulatory and market institutions, institutional reforms in the securities markets, strengthening investor protection mechanisms, and strengthening investor protection mechanisms.
Securities & Exchange Board Of India (SEBI)
The Securities and Exchange Board of India (SEBI) is the regulatory body established in accordance with the SEBI Act of 1992 and is the primary regulator for Stock Exchanges in India.
SEBI’s main functions include protecting investor interests, and promoting and regulating the Indian securities markets. All financial intermediaries allowed to participate in the Indian securities markets are governed by SEBI regulations.
In order to participate in the Indian securities markets, Foreign Portfolio Investors are required to register with DDPs.
The Reserve Bank Of India (RBI)
The Reserve Bank of India (RBI) is regulated by the Reserve Bank of India Act, of 1934.
The RBI is in charge of implementing monetary and credit policies, issuing currency notes, being a banker to the government, a regulator of the banking system, manager of foreign exchange, and regulator of payment & settlement systems while continuously advancing the growth of the Indian financial markets.
The RBI manages financial markets and systems through a variety of legislation. It also manages the foreign exchange markets through the Foreign Exchange Management Act, of 1999.
National Stock Exchange (NSE)
In the role of a securities market participant, NSE is required to establish and put into effect rules and regulations to govern the securities market.
These rules and regulations extend to member registration, transaction monitoring, compliance by members to SEBI / RBI regulations, securities listing, investor protection, etc.
NSE has a set of Rules and Regulations that are specifically applicable to each of its trading segments. NSE as an entity regulated by SEBI undergoes timely inspections by them to ensure compliance.
Acts Governing The Capital Markets
The Depositories Act,1996: The Act governs the depositories in Securities. The main objective of this Act is to ensure free transferability of securities with accuracy, speed, and security.
The Act eases the ownership of transferability of ownership from one person to another in a convenient way. This act has made the securities of Public limited companies along with the securities freely transferable.
Securities Contract (Regulation) Act, 1956– The regulatory Act deals with all types of issues relating to Stock trading. The Act ensures the smooth functioning of the stock exchanges and prevents any type of defective transactions.
Particularly, it deals with contracts in securities and the listing of stock exchanges.
Security and Exchange Board of India Act,1992– This Act provides the SEBI organization with statutory powers.
The governing body regulates the market in an assorted manner by protecting the interest of the shareholders, promoting the development of the Securities Market, and preventing any kind of malpractice in the market.
The Act grants a wide range of powers and scope to the SEBI in order to effectively and efficiently run the capital market.
Functions Of Capital Market & Its Regulators
- Raising Capital: The capital marker enables the firms to raise capital which they can use to invest in capital equipment. As there are many parties in the market who have the money which they do not need right away, they are ready to invest or lend this money in return for dividends or interest.
- Enables Economic Growth: The capital market enables more effective cash flow as it gives a marketplace for borrowers and lenders. Through this, firms are increases their capital which can help them grow their business and the suppliers of capital will get a return on their money which is lent or received. In this way, the economy continues to grow as the money keeps circulating.
- Protecting investors: Capital market regulators are responsible for ensuring that investors are protected from fraudulent or manipulative practices and that they have access to accurate and timely information to make informed investment decisions.
- Maintaining fair and efficient markets: Regulators oversee market participants and trading activities to ensure that markets operate in a fair and orderly manner and that prices reflect true supply and demand.
- Supervising market participants: Regulators supervise market participants such as brokerage firms, investment advisers, and exchanges to ensure that they are operating in compliance with laws and regulations.
In this article, we discussed the capital markets, their regulators, acts governing the Capital markets, and Functions of Capital Market & its Regulators
Capital market regulators play a crucial role in maintaining the integrity of the capital markets and protecting investors.
Their role is vital in ensuring that markets operate in a fair and transparent manner and that companies and individuals are held accountable for their actions.
With the help of capital market regulators, investors can have confidence in the markets, and companies can raise the capital they need to grow.
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