Identify the function performed by SEBI: “It controls insider trading and imposes penalties for such practices.”
- Protective functions
- Regulatory functions
- Developmental functions
- Preventive functions
The Correct Option is B
Approach Solution - 1
In the context of Business Studies, understanding the role of regulatory bodies like SEBI (Securities and Exchange Board of India) is crucial. SEBI's primary mission is to protect the interests of investors in securities and to promote the development of, and regulate, the securities market. One of the key functions performed by SEBI is controlling insider trading and imposing penalties for such practices.
Insider trading refers to the buying or selling of a publicly-traded company's stock by someone who has non-public, material information about that stock. To maintain trust in the capital markets, it is essential to regulate such activities. This aligns with SEBI's regulatory functions.
While evaluating the options:
- Protective functions: Involve safeguarding investors and ensuring their interests are protected. While SEBI does engage in protective roles, controlling insider trading goes beyond mere protection and involves regulation.
- Regulatory functions: Involve setting rules, guidelines, and frameworks to ensure fair trading practices and prevent market manipulation, which precisely describes the act of controlling insider trading.
- Developmental functions: Focus on the growth and advancement of the securities market through measures like introducing new financial instruments.
- Preventive functions: Aim to pre-empt and avert future problems or damages within the market, yet insider trading control is broader as it involves regulatory oversight.
Therefore, the function performed by SEBI in controlling insider trading and imposing penalties for such practices fits best under Regulatory functions.
Approach Solution -2
The function performed by SEBI as described in the statement is related to its regulatory functions. SEBI controls insider trading, takeover bids, and imposes penalties for such practices as part of its role in regulating the securities market to ensure fair practices and protect investor interests.
Correct Answer:
(2) Regulatory functions
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