Securities and Exchange Board of India (SEBI)
Note
India's securities markets are governed by a single statutory regulator whose powers span rule-making, investigation, and adjudication. SEBI was established under the SEBI Act, 1992 with quasi-legislative authority to frame regulations under Section 11, quasi-executive powers of investigation and search under Sections 11C-11D, and quasi-judicial powers to impose penalties under Section 15 and issue consent orders. This triple-hat structure distinguishes SEBI from purely executive agencies. Its jurisdiction covers stock exchanges, depositories, mutual funds, Alternative Investment Funds, FPI registration, insider trading under the PIT Regulations, 2015, and takeover norms under the SAST Regulations, 2011. Episodes such as the Hindenburg-Adani probe, T+0 settlement rollout, and F&O position-limit tightening illustrate how SEBI's regulatory architecture operates in practice.
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Questions on this topic
Consider the following statements regarding SEBI's regulatory mandate and the grey market for IPO shares in India:
- SEBI's statutory mandate under the SEBI Act, 1992 covers surveillance and enforcement over transactions conducted on recognised stock exchanges; informal grey-market trades in unlisted shares, occurring outside recognised exchanges without any paperwork or share transfer, fall outside the conventional scope of exchange-level surveillance.
- A high grey market premium (GMP) for an IPO constitutes a verified official indicator of actual subscription demand, since SEBI-registered intermediaries are required to report such data to the regulator.
- The grey market premium, being an informal price signal generated outside regulated market infrastructure, carries no legal enforceability — settlement occurs only through payment of the price difference, with no actual transfer of shares or legally recognised obligation.
Which of the statements given above is/are correct?
Explanation
Statement 1 is correct. SEBI's core surveillance and enforcement framework under the SEBI Act, 1992 and the Securities Contracts (Regulation) Act, 1956 is designed around recognised stock exchanges and SEBI-registered intermediaries. Grey market transactions in unlisted shares take place through informal word-of-mouth arrangements between private parties, entirely outside recognised exchanges, and therefore fall beyond the reach of SEBI's conventional exchange-level surveillance — a regulatory gap that market stakeholders and investor associations have explicitly flagged. Statement 2 is incorrect. The grey market premium (GMP) is explicitly an unofficial, unverified figure — not reported by SEBI-registered intermediaries and not sourced from actual subscription data. GMPs circulate through WhatsApp groups, Telegram channels, and informal tracking portals, and market players have warned that investors may mistake them for evidence of verified demand when they are not. SEBI has no mechanism to compel reporting of such informal prices. Statement 3 is correct. Grey market trades involve no paperwork, no transfer of shares, and no legal sanctity. Settlement is purely differential — only the difference between the grey-market price and the actual listing price changes hands. This structure is analogous to informal betting, and confers no enforceable legal rights on either party. A share physically never moves between buyer and seller in the grey market.
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