Key facts

  • SEBI became statutory on 30 January 1992; it was first constituted as a non-statutory body in 1988.
  • Article 246 with Union List Entry 48 supports central law on stock exchanges and futures markets.
  • Section 11 of the SEBI Act gives SEBI investor-protection, market-development and regulatory duties.
  • Sahara 2012 is central for SEBI jurisdiction over public-like fund raising through hybrid securities.
  • T+0 settlement is optional beta in equity cash markets, not a universal replacement for T+1.

Key Points at a Glance

  1. 1

    Money market normally covers instruments up to one year; capital market finances longer-term debt and ownership claims.

  2. 2

    SEBI became statutory on 30 January 1992; it was first constituted as a non-statutory body in 1988.

  3. 3

    Article 246 with Union List Entry 48 supports central law on stock exchanges and futures markets.

  4. 4

    Section 11 of the SEBI Act gives SEBI investor-protection, market-development and regulatory duties.

  5. 5

    RBI dominates money-market liquidity; SEBI dominates securities issuance, intermediaries, exchanges and investor protection.

  6. 6

    Sahara 2012 is central for SEBI jurisdiction over public-like fund raising through hybrid securities.

  7. 7

    T+0 settlement is optional beta in equity cash markets, not a universal replacement for T+1.

  8. 8

    SEBI regulates market conduct; it does not guarantee investment returns or run monetary policy.

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Financial-market map and legal basis

  • Core idea: a financial market channels savings into financial claims. In the money market, the claim is normally short term and used for liquidity management. In the capital market, the claim is medium or long term and used for investment, ownership, infrastructure finance, corporate expansion and government borrowing.
  • Money-market boundary: RBI describes the money market as a market with a maximum tenor of one year. Call money is overnight, notice money is 2 to 14 days and term money is 15 days to one year. Treasury bills, cash management bills, commercial paper, certificates of deposit, repo and tri-party repo are important instruments.
  • Capital-market boundary: the capital market covers equity shares, preference shares, debentures, bonds, units of collective investment vehicles, exchange-traded funds, derivatives, real estate investment trusts and infrastructure investment trusts when they are traded or issued under securities law. It has a primary market for fresh issue and a secondary market for trading existing securities.
  • Constitutional location: securities regulation is not named as a Fundamental Right subject. Legislative competence comes mainly from Article 246 read with the Seventh Schedule. Union List Entry 48 covers stock exchanges and futures markets; Entry 43 covers incorporation, regulation and winding up of trading corporations; Entry 44 covers corporations with objects not confined to one State; Entry 45 covers banking; Entry 46 covers bills of exchange, cheques and similar instruments. Article 301 also matters as a general constitutional background for freedom of trade, commerce and intercourse, subject to constitutional restrictions.
  • Private freedom is not absolute: Article 19(1)(g) protects the right to practise a profession or carry on trade, but Article 19(6) permits reasonable restrictions. Securities-market regulation therefore works through disclosure, registration, margining, surveillance and penalties rather than through a free-for-all market.
  • Main statutes: the SEBI Act, 1992 creates SEBI and gives it investor-protection, development and regulatory duties. The Securities Contracts Regulation Act, 1956 governs recognised stock exchanges and securities contracts. The Depositories Act, 1996 enables dematerialised holding and transfer. The Companies Act, 2013 governs company law, prospectus rules and corporate governance. RBI statutes and directions dominate the money-market and government-securities side.
  • Administrative split: the Department of Economic Affairs handles the financial-market division for central laws such as the SEBI Act, SCRA and Depositories Act. RBI manages monetary policy, liquidity and money-market regulation; SEBI regulates securities markets and market intermediaries. UPSC tests the split because both regulators touch debt instruments, but their entry points differ.
  • Development link: deep markets reduce overdependence on banks, widen household investment choices and lower long-term financing costs. Poorly regulated markets, however, can transmit fraud, speculation and systemic stress into household savings, which is why investor protection is not a side topic.

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PredictedPredicted Questions

Use these prompts to test answer structure before moving to practice.

1MCQConsider the following statements: 1. Union List Entry 48 covers stock exchanges and futures markets. 2. SEBI was a statutory body from the date of its first constitution in 1988. 3. Article 19(6) permits reasonable restrictions on trade under Article 19(1)(g). Which of the statements given above are correct?1 marks · 50 words
  1. A1 and 2 only
  2. B1 and 3 onlyCorrect
  3. C2 and 3 only
  4. D1, 2 and 3

Explanation

Entry 48 and Article 19(6) are correctly stated. SEBI was constituted in 1988 as a non-statutory body and became statutory in 1992.

~50 words · 1 marks