{"id":11590,"date":"2023-12-21T19:36:55","date_gmt":"2023-12-21T14:06:55","guid":{"rendered":"https:\/\/www.ixambee.com\/blog\/?p=11590"},"modified":"2023-12-21T19:36:57","modified_gmt":"2023-12-21T14:06:57","slug":"are-sebi-employees-allowed-to-trade","status":"publish","type":"post","link":"https:\/\/blog.ixambee.com\/are-sebi-employees-allowed-to-trade","title":{"rendered":"Are SEBI Employees Allowed to Trade?"},"content":{"rendered":"\n

The Securities and Exchange Board of India (SEBI)<\/strong> is an autonomous body. It has the responsibility of regulating and developing the securities market in India. It is a regulatory body under the Ministry of Finance. Its head office is located at Bandra Kurla Complex, Mumbai. <\/p>\n\n\n\n

Many students dreams of becoming a SEBI officer<\/a>, where they can play a crucial role in the operations of trading and the stock exchange of India. Among all of this, there is one thing that left everyone buzzing over a major regulation that every SEBI employee is obliged to follow.\u00a0<\/p>\n\n\n\n

In this blog, we will understand the importance of SEBI as the securities market regulator. Moreover, we will also answer a very interesting question relating to the trading in securities by SEBI employees.<\/p>\n\n\n\n

Before moving further, let’s have a brief introduction about what SEBI is all about and what is its importance. <\/p>\n\n\n

\"Are<\/figure>\n\n\n

What is SEBI?<\/strong><\/h2>\n\n\n\n

SEBI was first established as a non-statutory body on April 12, 1988, through an Administrative Resolution of the Government of India with the objective of regulating and developing the securities market and protecting the interest of the investors. However, it was given statutory powers on January 30, 1992, with the passing of the SEBI Act 1992 by the Parliament. The SEBI Act came into force on April 04, 1992.<\/p>\n\n\n\n

Why was SEBI Constituted?<\/strong><\/h2>\n\n\n\n

SEBI was constituted because, before SEBI, the law relating to the regulation of securities was contained in different statutes. These are- the Companies Act, 1956, Securities Contract (Regulation) Act, 1956, and the Capital Issues (Control) Act, 1947. This made regulation of the securities market difficult as the legislations were scattered and the administrative agencies did not have the proper expertise to deal with the investors.<\/p>\n\n\n\n

However, the Government of India conferred additional statutory powers to SEBI in the year 1995 through an amendment to the SEBI Act, 1992.<\/p>\n\n\n\n

Objectives of SEBI<\/strong><\/h2>\n\n\n\n

The preamble of the SEBI Act states the objective of the organization. They are as follows-<\/p>\n\n\n

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Structure of SEBI<\/strong><\/h2>\n\n\n\n

The SEBI Board is managed by its members and consists of the following-<\/p>\n\n\n\n

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Powers of SEBI<\/strong><\/h2>\n\n\n\n

SEBI is a very unique and powerful regulatory body because it has all three powers rolled into one single entity. These powers include-<\/p>\n\n\n\n

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Moreover, to ensure accountability, SEBI also provides an appeal process. An aggrieved party can file an appeal to the Securities Appellate Tribunal (SAT). SAT has the power of hearing and disposing the appeals against the orders passed by SEBI. Furthermore, a party aggrieved by the order of SAT can prefer a second appeal to the Supreme Court of India.<\/p>\n\n\n\n

Functions of SEBI<\/strong><\/h2>\n\n\n\n

Given below are some of the functions of SEBI-<\/p>\n\n\n\n

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Are SEBI Employees Allowed to Trade?<\/strong><\/h2>\n\n\n\n

The securities market in India has developed manifold in the last few decades. Many people are now investing in the securities market because there is a potential of earning higher returns. During the Covid-19 pandemic, when so many people lost their jobs, the returns from the securities market offered a slight respite in the form of passive income. However, when it comes to its employees, SEBI has put several restrictions.<\/p>\n\n\n\n

Now that we have understood what SEBI is and learned about its role, objectives, and powers, with respect to the securities market, let\u2019s now look into another important aspect-<\/p>\n\n\n\n

Can SEBI employees trade in the securities market?<\/strong><\/p>\n\n\n\n

The short answer is, No.<\/p>\n\n\n\n

As per the SEBI (Prohibition of Insider Trading) Regulations, 2015,<\/strong><\/a> SEBI employees are prohibited from trading in securities.<\/p>\n\n\n\n

SEBI issued the law of (Prohibition of Insider Trading Regulations) in 2015. Under this law, any professional acting as a KMP, board of directors, or associated with the promotor group in any way shall be prohibited from trading or investing in securities that are listed or happen to be listed in the Stock Exchange. <\/p>\n\n\n\n

The law was last amended in November 2022<\/strong><\/a> with the prohibition of communication of insiders about trading to any external body or person. The restriction of SEBI Employees from trading left people curious about the potential reasons behind it. You are going to know about those reasons later in this blog.\u00a0<\/p>\n\n\n\n

But before that, let us first understand the difference between Investment and Trading.<\/p>\n\n\n\n

Investing<\/strong><\/h3>\n\n\n\n

The purpose behind investing is to gradually build your wealth over an extended period of time. This is done through the buying and holding of a portfolio of stocks, mutual funds, bonds, and other investment instruments. Generally, investments are held for a period of years or even decades. This enables the investors to take advantage of benefits like interest and dividends along the way. <\/p>\n\n\n\n

Trading<\/strong><\/h3>\n\n\n\n

On the contrary, trading deals with more frequent transactions like- buying and selling of stocks, commodities and other instruments. The goal here is to make short-term gains by buying at lower prices and selling at higher prices. This is done within a relatively short period of time.<\/p>\n\n\n\n

Let us look at the provisions in detail-<\/p>\n\n\n\n

Regulations<\/strong><\/td>What They Provide<\/strong><\/td><\/tr>
63-  Private Trading<\/strong><\/td>It prohibits employees from engaging in any commercial business either on his own account or as an agent for others<\/td><\/tr>
64- Restriction on Investments<\/strong><\/td>No employee can make an investment either directly or indirectly in equity or equity related instruments including convertible debentures or warrants

The employee will not invest-<\/strong>

In his name<\/strong> or

In the name<\/strong> of his dependent children<\/strong> or other wards managed by him as their guardian<\/strong>

Investment made by spouse, dependent, children, dependent parents and parent-in-laws of the employee<\/strong> out of the money received from the employee.

Exception- <\/strong>SEBI employees can invest in units of mutual funds, non- convertible debentures and bonds and in rights issues in respect of the shares already held by him.<\/td><\/tr>
65- Speculation in Stock, Shares, Investments, etc.<\/strong><\/td>(1) Employees are prohibited from engaging in ‘Badla’ trading\/trade, speculating in stock, shares, securities or commodities of any description.

(2) Employees having knowledge of unpublished price sensitive information shall not encourage any person to deal in securities to which it relates.

(3) Each employee will be deemed as an \u201cinsider\u201d within the meaning of Regulation 2 (1) (g) of the SEBI (Prohibition of Insider Trading) Regulations 2015 and the provisions of this regulation are applicable to each member of the Board.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Reasons for not allowing SEBI Employees to Trade<\/strong><\/h3>\n\n\n\n

Being a regulator of the securities market, it is the duty of SEBI to provide an equal footing to investors and traders. Given below are the reasons for not allowing SEBI employees to trade-<\/p>\n\n\n\n