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SEBI Act 1992: Powers and Functions of SEBI

Updated 11 October 2026 · Fact-checked

The SEBI Act, 1992 sets up the Securities and Exchange Board of India. Under Section 11(1), SEBI must protect investors in securities, promote the development of the securities market and regulate it. To answer a question, name the duty, pick the matching Section 11 measure, and state the power used.

Understand SEBI Act 1992: Establishment, Powers and Functions

SEBI is the regulator of India's securities market. The SEBI Act, 1992 gives it a legal base and tells it what it must do and what it may do.

Start with the duty in Section 11(1). It is the Board's duty to protect the interests of investors in securities, to promote the development of the securities market and to regulate it, by such measures as it thinks fit. Almost every exam answer begins here. Remember the three limbs: protect, promote, regulate.

Section 11(2) lists measures without limiting the general duty. They fall into groups. Some regulate markets and intermediaries: stock exchanges, stock brokers, registrars, merchant bankers, underwriters, portfolio managers, investment advisers, depositories, participants, custodians, foreign institutional investors, credit rating agencies, venture capital funds, collective investment schemes and mutual funds. Some set conduct rules: prohibiting insider trading and regulating substantial acquisition of shares and takeovers. Some are supportive: promoting self-regulatory organisations, investor education, training of intermediaries, research, and levying fees.

Then come the information and enforcement powers. SEBI can call for information, inspect, inquire and audit. It can call for records from any person, including a bank. It can exchange information with foreign regulators, but to furnish information outside India under an arrangement it needs the Central Government's prior approval. For these inquiry powers, Section 11(3) gives SEBI the powers of a civil court, such as discovery and production of documents, summoning persons and examining them on oath.

Finally, Section 11(4) lets SEBI pass orders, for reasons recorded in writing, in the interests of investors or the securities market, pending or after an investigation. Examples are suspending trading of a security, restraining persons from the market, impounding proceeds, attaching bank accounts for up to ninety days, and directing non-disposal of assets. A hearing must be given, before or after the order. Section 11(4A) allows penalties after an inquiry. Disgorged amounts go to the Investor Protection and Education Fund under Section 11(5).

Key rules to remember

Core duty: Section 11(1): protect investors + promote development + regulate the securities market; Measures are 'as it thinks fit', subject to the Act.
Section 11(2) is illustrative: Measures 'without prejudice to the generality' of Section 11(1); The list does not limit SEBI's general duty.
Civil court powers: Section 11(3): discovery and production of documents; summoning and examining on oath; inspection; issuing commissions; Used while exercising clause (i) or (ia) of Section 11(2) or Section 11(2A).
Interim and directive orders: Section 11(4): suspend trading, restrain access to market, suspend office-bearers, impound proceeds, attach for up to 90 days, direct non-disposal; Reasons in writing; hearing before or after the order.
Attachment confirmation: Attachment ≤ 90 days unless confirmed by the Special Court under Section 26A; Only property or accounts tied to proceeds actually involved in the violation can be attached.
Penalty power: Section 11(4A): penalty under listed sections (15A to 15HB) after an inquiry in the prescribed manner; Order must record reasons in writing.
Disgorgement: Disgorged amount → Investor Protection and Education Fund (Section 11(5)); Applies to directions under Section 11B, Section 12A of SCRA and Section 19 of the Depositories Act.

How to solve SEBI Act 1992: Establishment, Powers and Functions questions

Most questions give a SEBI action or a market problem. Link it to the right limb of Section 11 and state the conditions.

1Read the facts and identify who is acting: SEBI, an intermediary, a listed company or an investor.
2State the duty under Section 11(1): protect investors, promote development, regulate the market.
3Match the facts to a Section 11(2) measure, such as registering intermediaries, banning insider trading or regulating takeovers.
4Identify the power needed: information and inspection, civil court powers under Section 11(3), or orders under Section 11(4).
5State the conditions: reasons recorded in writing, hearing, the 90-day limit for attachment and Special Court confirmation.
6Name the consequence: penalty under Section 11(4A), or disgorgement credited to the Investor Protection and Education Fund.
7Close with a one-line conclusion that applies the rule to the facts.

Quickest way: Duty, measure, power, safeguard

When to use it: Use for short notes and MCQs where you must place a SEBI action under the right provision quickly.

Duty: write Section 11(1) in one line.
Measure: pick the group from Section 11(2): market, intermediaries, conduct, support.
Power: information and civil court powers, or orders under Section 11(4).
Safeguard: written reasons, hearing, 90-day attachment limit.
Outcome: penalty or disgorgement.

Common mistakes in SEBI Act 1992: Establishment, Powers and Functions

Treating the Section 11(2) list as complete.
Students memorise the list and assume nothing else is allowed.
Fix: Write that the measures are 'without prejudice to the generality' of Section 11(1), so SEBI may take other measures it thinks fit, subject to the Act.
Saying SEBI can attach property indefinitely.
The 90-day limit sits inside a long clause and is missed.
Fix: State that attachment under Section 11(4)(e) is for up to ninety days, and continues only if the Special Court under Section 26A confirms it within that time.
Forgetting the hearing and written reasons.
Students focus on the powers and ignore safeguards.
Fix: Always add that orders under Section 11(4) need reasons recorded in writing and an opportunity of hearing, before or after the order.
Saying SEBI can share information abroad freely.
Clause (ib) is read without its proviso.
Fix: Add that to furnish information to an authority outside India under an arrangement, SEBI needs the Central Government's prior approval.
Applying civil court powers to every SEBI action.
Section 11(3) looks general.
Fix: Link them to inquiry and inspection under clauses (i) and (ia) of Section 11(2) and Section 11(2A).
Confusing Section 11 with penalty and appeal provisions.
All SEBI Act provisions are studied together.
Fix: Use Section 11 for functions and powers. Appeals to the Securities Appellate Tribunal are a separate topic (Section 15L covers its composition).

Worked examples

Example 1

SEBI suspects that a promoter of a listed Indian company has traded on unpublished price-sensitive information. SEBI wants to inspect the company's books and examine the promoter. Advise on SEBI's powers.

Show the solution

Duty: under Section 11(1) SEBI must protect investors and regulate the market. Prohibiting insider trading is a listed measure under Section 11(2)(g).
Inspection: Section 11(2A) lets SEBI inspect books, registers and records of a listed public company where it has reasonable grounds to believe the company has been indulging in insider trading or fraudulent and unfair trade practices.
Powers: under Section 11(3) SEBI has civil court powers for this: it can require discovery and production of documents, and summon persons and examine them on oath.
Interim steps: if needed, under Section 11(4) SEBI can impound proceeds of the transaction or direct that assets under investigation not be disposed of, for reasons recorded in writing.
Safeguard: SEBI must give the persons concerned a hearing, before or after the order.

Answer: SEBI can inspect the company's records under Section 11(2A), summon and examine the promoter on oath under Section 11(3), and, for reasons in writing and after giving a hearing, impound proceeds or restrain disposal of assets under Section 11(4).

Example 2

SEBI attaches the bank account of an intermediary on 1 March, alleging violation of the Act. SEBI has not approached the Special Court by 15 June of the same year. Is the attachment valid?

Show the solution

Rule: under Section 11(4)(e), attachment is for a period not exceeding ninety days.
Condition: within ninety days SEBI must obtain confirmation from the Special Court established under Section 26A.
Count: 1 March to 15 June is 106 days (31 + 30 + 31 + 14 = 106 counting from 1 March). This is more than ninety days.
Without confirmation, the attachment cannot continue beyond ninety days.
Also note that only property or accounts related to proceeds actually involved in the violation may be attached.

Answer: The attachment is not valid beyond ninety days. As no Special Court confirmation was obtained within that period, it cannot continue on 15 June.

Exam tips

Learn Section 11(1) word for word in simple form. It opens most descriptive answers.
For MCQs, expect questions on the ninety-day attachment, Special Court confirmation and civil court powers under Section 11(3).
In case scenarios, always mention written reasons and the hearing before concluding that SEBI's order stands.
Group the Section 11(2) measures into intermediaries, market conduct and supportive functions so you can recall them quickly.
Do not quote section numbers you are unsure of. Use only the ones in this guide.

Practice questions from SEBI Laws and Regulations

SEBI Act 1992: Establishment, Powers and Functions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

SEBI Act 1992: Establishment, Powers and Functions: frequently asked questions

What is the main duty of SEBI under the SEBI Act, 1992?

Under Section 11(1), SEBI must protect the interests of investors in securities, promote the development of the securities market and regulate it. It may do so by such measures as it thinks fit, subject to the Act.

Does SEBI have powers of a civil court?

Yes, for specific matters. Section 11(3) gives SEBI the powers of a civil court while exercising certain inquiry and inspection powers. These include discovery and production of documents, summoning and examining persons on oath, inspection and issuing commissions.

Can SEBI suspend trading in a security?

Yes. Under Section 11(4)(a), SEBI may suspend trading of any security in a recognised stock exchange, for reasons recorded in writing and in the interests of investors or the market. It must give a hearing, before or after the order.

What happens to amounts disgorged by SEBI?

Under Section 11(5), amounts disgorged under directions of the Act, the Securities Contracts (Regulation) Act or the Depositories Act are credited to the Investor Protection and Education Fund. SEBI uses the fund as the regulations provide.