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CS Executive · Capital Market and Securities Laws

Securities and Exchange Board of India: CS Executive Study Guide

The Securities and Exchange Board of India (SEBI) is the statutory securities market regulator set up under the SEBI Act, 1992. In this chapter, learn its short title, extent, commencement, incorporation, key definitions, the term and removal of the Chairman and certain members, and the transfer of the earlier Board's assets. Write answers as provision, analysis, conclusion.

What this chapter covers

This chapter introduces SEBI as a legal entity. You study the opening provisions of the SEBI Act, 1992: its short title, where it applies, when it is deemed to have come into force, how the Board is established and made a body corporate, the key definitions, the term and removal rules for the Chairman and certain members, and what happened to the older non-statutory board when SEBI was created.

The facts are small but exact. Section 1 says the Act extends to the whole of India and is deemed to have come into force on 30 January 1992. Section 3 says the Board is established from a date the Central Government notifies, and is a body corporate with perpetual succession and a common seal. It can acquire, hold and dispose of property, contract, and sue or be sued by its name. Its head office is at Bombay, and it may set up offices elsewhere in India. Section 10 moves the assets, rights, liabilities, proceedings and employees of the existing Securities and Exchange Board to the new Board.

Who sits on the Board (its composition) is set out in section 4. Sections 2 and 5 give only the definitions and the term and removal conditions, so read section 4 separately for composition questions.

This chapter sets the base for the rest of Paper 5. Later chapters cover the Board's powers, registration of intermediaries (section 12), the Securities Appellate Tribunal (section 15L) and the other securities laws. If you know who SEBI is in law, those chapters are easier to follow.

The chapter is short, factual and easy to score on if you are precise. Questions often ask you to state a provision, such as the features of the Board as a body corporate, or to apply it to a short fact situation. Students who remember only the general idea lose marks on details like perpetual succession, the notification requirement, the six-month option for employees and the head office. Since Paper 5 is written, a clear answer that cites the right section reads as well prepared, and the same sections help you in later chapters on SEBI's powers and tribunal.

Securities and Exchange Board of India: topics in the order to study them

  1. 1SEBI Act, 1992: Short Title, Extent and CommencementStart here. It is the shortest part and gives you the name of the Act, its territorial reach and the deemed commencement date in section 1.
  2. 2Establishment and Incorporation of SEBINext, learn how the Board comes into existence and what legal status it has under section 3, because the later topics build on it.
  3. 3Definitions, Term and Removal: Sections 2 and 5Once the Board exists, learn the key definitions in section 2 and the term and removal rules in section 5. Who sits on the Board is set out in section 4, so read that section too for composition questions.
  4. 4Transfer of Assets and Liabilities to SEBIStudy this last, since it needs you to understand both the new Board and the existing Securities and Exchange Board it replaced, under section 10.

How to prepare Securities and Exchange Board of India

This chapter rewards careful reading of the Act more than long hours. Use the sections as your base and build short answers around them.

  1. Read sections 1, 2, 3, 5 and 10 of the SEBI Act in order, once, without notes, to get the flow.
  2. Make a one-page sheet for each section with the key terms: deemed commencement, notification, body corporate, perpetual succession, common seal, vesting.
  3. Learn the section 3 powers as a list: acquire, hold and dispose of property; contract; sue or be sued.
  4. For section 10, write the seven consequences (clauses a to g) in your own words and note the six-month option for employees and the bar on compensation in sub-section (2).
  5. For section 5, note that the Central Government can end the service of the Chairman or a member appointed under section 4(1)(d) by three months' written notice or three months' salary and allowances in lieu, and that they can relinquish office on three months' written notice.
  6. Practise two or three short answers in the ICSI style: state the provision, apply it, then give a one-line conclusion with the section number.
  7. Revise the sheets twice in the week before the exam, and once more on the last day.

Common mistakes in Securities and Exchange Board of India

  • Saying SEBI came into existence on 30 January 1992 as the date of establishment.

    Fix: Keep them apart: the Act is deemed to have come into force on 30 January 1992, while the Board is established from a date the Central Government notifies.

  • Listing only 'body corporate' and missing other features of the Board.

    Fix: Write all features: perpetual succession, common seal, power to hold property and contract, and to sue or be sued by its name.

  • Confusing the existing Securities and Exchange Board with the statutory Board.

    Fix: Remember that the existing Board was set up by a Government resolution of 12 April 1988 and the statutory Board takes over its assets and liabilities under section 10.

  • Forgetting the employee rules in section 10.

    Fix: Note that employees continue on the same terms, can opt out within six months, and have no compensation claim on absorption.

  • Stating the termination rule in section 5 loosely, or applying it to every member of the Board.

    Fix: State the exact conditions: the power covers the Chairman or a member appointed under section 4(1)(d), on written notice of not less than three months or three months' salary and allowances in lieu. The Chairman or such a member may relinquish office on three months' written notice.

  • Writing answers without citing the section number.

    Fix: Attach the section to each point on your revision sheet, such as section 3 for incorporation and section 10 for transfers, and cite it in the answer.

Last-day revision: Securities and Exchange Board of India

  • SEBI Act, 1992 is cited by its short title in section 1; it extends to the whole of India.
  • The Act is deemed to have come into force on 30 January 1992.
  • The Board is established under section 3 from a date the Central Government appoints by notification.
  • The Board is a body corporate with perpetual succession and a common seal.
  • It can acquire, hold and dispose of movable and immovable property, contract, and sue or be sued.
  • The head office is at Bombay; the Board may set up offices at other places in India.
  • The existing Securities and Exchange Board was constituted under a Government of India resolution dated 12 April 1988.
  • Section 10: the existing Board's property, rights, liabilities, contracts and dues pass to the new Board.
  • Legal proceedings by or against the existing Board may be continued or started by or against SEBI.
  • Employees continue on the same terms, unless they opt out within six months.
  • Absorption of employees gives no right to compensation under the Industrial Disputes Act, 1947 or other law.
  • Section 5(2): the Central Government can terminate the Chairman or a member appointed under section 4(1)(d) on three months' written notice or three months' salary and allowances in lieu; they may relinquish office on three months' written notice.

Securities and Exchange Board of India practice questions

Securities and Exchange Board of India in other exams

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

Securities and Exchange Board of India: frequently asked questions

What is the full name and extent of the SEBI Act?

It is called the Securities and Exchange Board of India Act, 1992. Section 1 says it extends to the whole of India and is deemed to have come into force on 30 January 1992.

What does 'body corporate' mean for SEBI?

It means SEBI is a legal person separate from its members. Under section 3 it has perpetual succession and a common seal, can hold property and make contracts, and can sue or be sued in its own name.

Where is SEBI's head office?

Section 3 of the Act says the head office of the Board shall be at Bombay. The Board may also establish offices at other places in India.

What happens to the employees of the earlier Board under section 10?

They continue to hold office in SEBI on the same tenure and terms, including leave, provident fund and retirement benefits. An employee who opts not to join within six months can leave, and absorption gives no right to compensation under the Industrial Disputes Act, 1947 or any other law.

Is this chapter enough to answer questions on SEBI's powers?

No. This chapter covers the legal setup of the Board. Its powers, registration of intermediaries and the Securities Appellate Tribunal are studied in later chapters of Paper 5.