Who regulates the the secondary market for shares in India?

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justaguide eNotes educator| Certified Educator

In India the secondary market for shares is governed by an organization called the Securities and Exchange Board of India or SEBI.

The Indian Stock market was largely unregulated prior to the creation of the SEBI. In 1990, a trader named Harshad Mehta started to misuse loopholes in the banking system as well in the delivery mechanism of stocks bought and sold on the Bombay Stock Exchange. The result was one the fastest bull runs in the history of the Indian stock market. Almost INR 40 billion were siphoned from the banking system to manipulate stock prices to extraordinarily high levels. In 1992, when the scam was finally discovered, millions had lost their lives' fortunes and the incident had adversely affected the reputation of the Indian stock markets.

To bring investors back into the stock market and attract foreign fund houses, the stock markets had to be made safe and well-regulated. The Securities and Exchange Board of India Act, 1992 was passed and under its provisions SEBI was set up.

The regulatory body closely monitors all transactions that go on in the stock markets and any cases of price rigging or manipulation are immediately dealt with.