What Is SEBI in the Stock Market? Updated January 2026

The Indian stock market plays a vital role in the country’s economic growth, allowing companies to raise capital and investors to build wealth. However, without proper regulation, financial markets can become unsafe, unfair, and vulnerable to fraud.

This is where SEBI (Securities and Exchange Board of India) comes in.SEBI is the regulatory authority that oversees India’s stock market. Its primary role is to protect investors, regulate market participants, and ensure transparent and fair trading practices.

If you are a beginner investor or planning to enter the stock market, understanding what is SEBI in the stock market and how it works is essential for safe investing and learning stock market trading basics for beginners.

Why Was SEBI Established? {#why-was-sebi-established}

Before SEBI was formed, the Indian stock market lacked proper regulation. This led to:

• Insider trading

• Price manipulation
• Unethical practices
• Loss of investor confidence

Several financial scams (e.g., Harshad Mehta scam in 1992) highlighted the need for a strong regulatory authority among participants in indian stock market. As a result, SEBI was established to:

• Safeguard investor interests

• Bring discipline to the securities market

• Improve transparency and accountability

History and Formation of SEBI {#history-and-formation-of-sebi}

• 1988: SEBI was initially formed as a non-statutory body

• 1992: SEBI became a statutory authority after the introduction of the SEBI Act, 1992

SEBI Act, 1992 – Overview

The SEBI Act empowered the organisation with legal authority to

• Regulate stock exchanges

• Register market intermediaries

• Investigate violations

• Penalize fraudulent activities

This marked a major turning point in the development of India’s capital markets.

Objectives of SEBI {#objectives-of-sebi}

The main objectives of SEBI are:

• Protecting the interests of investors

• Regulating the securities market

• Ensuring fair and transparent trading

• Preventing fraud and malpractices

• Promoting the development of the capital market

These objectives form the foundation of SEBI’s regulatory framework.

SEBI performs three major types of functions:

Regulatory Functions

• Registration of brokers, sub-brokers, and intermediaries

• Regulation of stock exchanges like NSE and BSE

• Monitoring IPOs and listed companies

• Framing rules for market participants

Protective Functions

• Preventing insider trading
• Controlling price manipulation
• Banning unfair trade practices
• Handling investor complaints

Developmental Functions

• Promoting investor education and awareness

• Introducing new financial instruments (e.g., REITs as equity from Jan 2026)

• Supporting innovation and market growth

Powers and Authority of SEBI {#powers-and-authority-of-sebi}

SEBI has extensive powers to maintain market discipline:

• Power to frame rules and regulations

• Authority to investigate and inspect market participants

• Power to impose fines and penalties

• Authority to suspend or cancel registrations

• Power to ban individuals or companies from the market

These powers help SEBI act decisively against violations, as seen in recent cases like banning influencers for unregistered advisory.

Investor protection is SEBI’s most important responsibility.SEBI ensures investor safety by:

• Mandating disclosures from companies

• Monitoring broker activities

• Enforcing transparency in trading

• Penalising misleading practices

Retail investors benefit greatly from SEBI’s strict regulatory oversight, including mandatory client fund segregation in new broker rules.

SEBI SCORES (SEBI Complaints Redress System) is an online platform that allows investors to file complaints against market intermediaries.

How SCORES Works:

1. Investor submits a complaint online

2. Concerned entity responds within a fixed time (e.g., 15-30 days)

3. SEBI monitors the resolution process

Key Stats: SEBI resolved ~4,400 complaints monthly in 2025 via SCORES, strengthening trust Business Standard, Jul 2025. Use SCORES for quick grievance redressal—over 90% resolution rate.

JOR Regulations Issued by SEBI {#major-regulations-issued-by-sebi}

Some important SEBI regulations include:

• IPO Guidelines: Ensure fair pricing and disclosures (uniform KPIs from Apr 2025)
• Mutual Fund Regulations: Protect unit holders (updated 2026)
• Insider Trading Rules: Prevent misuse of unpublished price-sensitive information (expanded UPSI in 2025)
• Corporate Governance Norms: Improve transparency in listed companies

• Disclosure Requirements: Ensure informed decision-making

Recent SEBI Updates (2025-2026) {#recent-sebi-updates-2025-2026}

SEBI focused on enforcement in 2025, overhauling outdated rules for digital-era markets Kotak Securities COO, Dec 2025.Key Reforms:

• SEBI (Stock Brokers) Regulations, 2025: Replaces 1992 rules; defines algo/proprietary trading, mandates client fund segregation, cybersecurity. Reduces rulebook by 50% for simplicity Economic Times, Dec 17, 2025.

• SEBI (Mutual Funds) Regulations, 2026: Redefines Total Expense Ratio (TER = Base Expense Ratio + Brokerage + Levies on actuals). Cuts BER limits (e.g., index funds to 0.9%), caps brokerage (6bps equity cash). REITs as equity from Jan 2026 IndMoney, Dec 2025.

• Duplicate Securities Norms: Threshold doubled to ₹10 lakh for simplified docs (Dec 2025) Economic Times, Dec 24, 2025.
• T+0 Settlement: Phased rollout for top 500 stocks in 2026 (extended from 2025) Outlook Money, Jan 2026.

• Securities Markets Code Bill, 2025: Merges SEBI Act 1992, SCRA 1956, Depositories Act 1996. Expands SEBI board to 15, Ombudsperson for grievances, decriminalizes minor lapses. Under parliamentary review PRS India, Dec 2025.

• Others: Merchant bankers net-worth hike (Jan 2026), retail algo trading framework (Oct 2025).

Timeline Infographic Suggestion: Visualize as a chart—1988 (Non-statutory) → 1992 (Statutory) → 2025-26 (Digital Overhaul).

These updates enhance transparency, cut costs (e.g., lower TER), and boost efficiency—benefiting beginners with safer, cheaper investing.

SEBI regulates all major participants in the securities market, including:

• Stock exchanges (NSE & BSE)

• Brokers and sub-brokers (under new 2025 regs)

• Mutual funds and asset management companies (2026 updates)

• Listed companies

• Depositories (NSDL & CDSL)

Importance of SEBI in Indian Stock Market {#importance-of-sebi-in-indian-stock-market}

SEBI plays a crucial role in maintaining market stability by:

• Ensuring transparency and fairness

• Building investor confidence

• Preventing financial frauds

• Encouraging ethical business practices

• Supporting long-term economic growth (e.g., $21B IPOs in 2025)

A well-regulated market attracts both domestic and foreign investors Whalesbook, Dec 2025.

Difference Between SEBI and Stock Exchanges {#difference-between-sebi-and-stock-exchanges}

Many beginners confuse SEBI with stock exchanges, so knowing the nse vs bse difference is important. SEBI acts as a regulator, while NSE and BSE allow buying and selling of shares. The table below makes this easy to understand.

SEBI vs RBI – Are They the Same? {#sebi-vs-rbi}

No, SEBI and RBI are not the same. They are two different regulatory authorities in India, each with distinct roles in the financial system. No major changes in 2026 Latest Confirmations.

Key Differences Between SEBI and RBI

Simple Explanation for Beginners:

• SEBI focuses on how shares, mutual funds, and other securities are issued, traded, and regulated (e.g., 2025 broker rules).

• RBI focuses on how money flows in the economy, including banking operations, loans, interest rates, and currency management.

How SEBI and RBI Work Together: They coordinate for financial stability—RBI on banking risks, SEBI on capital markets. E.g., joint oversight on "other regulated instruments" in Securities Code Bill 2025.