Question

State any three protective functions of Securities and Exchange Board of India (SEBI).

Hint:

"Protective" functions are like the "Police" role of SEBI—they stop bad things from happening to your money.

Answer 1

Step 1: Understanding the Concept:
SEBI was established to protect the interests of investors and to promote the development of the securities market. Its "Protective Functions" focus specifically on preventing malpractice.
Step 2: Detailed Explanation:
1. Prohibition of Fraudulent and Unfair Trade Practices: SEBI prevents activities like price rigging, making misleading statements, and manipulating market prices to cheat investors.
2. Prohibition of Insider Trading: It prevents "insiders" (like directors or promoters who have access to price-sensitive private information) from using that information to make illegal profits by trading in the company's shares.
3. Promotion of Fair Practices and Code of Conduct: SEBI ensures that intermediaries (like brokers) follow a strict code of conduct and it educates investors so they can protect themselves from being exploited.
Step 3: Final Answer:
The protective functions aim to ensure a fair, transparent, and safe environment for investors by eliminating fraud and insider trading.