Question:
Riya, a software engineer wanted to invest a part of her savings in the
stock-market. Encouraged by some online discussions, she came across a
company ‘Smart-Tech Ltd.’, whose stock price was rising very fast. News
began to circulate that company had got a large government contract and
she believed that its share price would double soon. Convinced by the
positive claims, Riya also invested in the shares of this company. Over the
next week, the shares continued to rise but suddenly, the price started
crashing. Within days, her investment had lost more than 60
value.
Riya started researching and discovered that the news about the
government contract was false. Securities and Exchange Board of India
(SEBI) also took immediate notice of the situation and called for detailed
trading information and conducted enquiries and inspections. After
examining trading information and conducting enquiries, SEBI found that
a group of traders had spread false information to artificially boost the
stock price. By taking action against the group of traders, SEBI made it
clear that fraudulent and unfair trade practices are strictly prohibited.
(i) Quote lines from the above to identify the two functions being
performed by SEBI.
Riya, a software engineer wanted to invest a part of her savings in the
stock-market. Encouraged by some online discussions, she came across a
company ‘Smart-Tech Ltd.’, whose stock price was rising very fast. News
began to circulate that company had got a large government contract and
she believed that its share price would double soon. Convinced by the
positive claims, Riya also invested in the shares of this company. Over the
next week, the shares continued to rise but suddenly, the price started
crashing. Within days, her investment had lost more than 60
value.
Riya started researching and discovered that the news about the government contract was false. Securities and Exchange Board of India (SEBI) also took immediate notice of the situation and called for detailed trading information and conducted enquiries and inspections. After examining trading information and conducting enquiries, SEBI found that a group of traders had spread false information to artificially boost the stock price. By taking action against the group of traders, SEBI made it clear that fraudulent and unfair trade practices are strictly prohibited.
(i) Quote lines from the above to identify the two functions being performed by SEBI.
Riya started researching and discovered that the news about the government contract was false. Securities and Exchange Board of India (SEBI) also took immediate notice of the situation and called for detailed trading information and conducted enquiries and inspections. After examining trading information and conducting enquiries, SEBI found that a group of traders had spread false information to artificially boost the stock price. By taking action against the group of traders, SEBI made it clear that fraudulent and unfair trade practices are strictly prohibited.
(i) Quote lines from the above to identify the two functions being performed by SEBI.
Show Hint
Regulatory functions relate to the 'rules and supervision' of market participants.
Protective functions relate to 'investor safety' and 'preventing malpractice'.
Always look for words like 'inspection' or 'audit' for regulatory and 'fraud' or 'prohibited' for protective.
Updated On: Jul 18, 2026
Show Solution
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Solution and Explanation
Concept:
• Regulatory Functions: These include the registration of brokers and agents, notification of rules, and the conduct of enquiries and audits of stock exchanges.
• Protective Functions: These aim to protect the interest of investors by preventing fraudulent and unfair trade practices like price rigging and insider trading.
Step 1: Identify and quote the Regulatory Function
The regulatory function is evidenced by SEBI's administrative and monitoring actions.
Quote: “...called for detailed trading information and conducted enquiries and inspections.”
Step 2: Identify and quote the Protective Function
The protective function is evidenced by SEBI's efforts to maintain market integrity and protect retail investors from manipulation.
Quote: “By taking action against the group of traders, SEBI made it clear that fraudulent and unfair trade practices are strictly prohibited.”
• Regulatory Functions: These include the registration of brokers and agents, notification of rules, and the conduct of enquiries and audits of stock exchanges.
• Protective Functions: These aim to protect the interest of investors by preventing fraudulent and unfair trade practices like price rigging and insider trading.
Step 1: Identify and quote the Regulatory Function
The regulatory function is evidenced by SEBI's administrative and monitoring actions.
Quote: “...called for detailed trading information and conducted enquiries and inspections.”
Step 2: Identify and quote the Protective Function
The protective function is evidenced by SEBI's efforts to maintain market integrity and protect retail investors from manipulation.
Quote: “By taking action against the group of traders, SEBI made it clear that fraudulent and unfair trade practices are strictly prohibited.”
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