Question

Identify the function performed by SEBI: “It controls insider trading and imposes penalties for such practices.”

• A. Protective functions
• B. Regulatory functions
• C. Developmental functions
• D. Preventive functions

Answer 1

The Correct Option is B

For Business Studies, understanding SEBI's role (Securities and Exchange Board of India) is vital. SEBI aims to protect investors and regulate the securities market. A key function is controlling insider trading and penalizing it.

Insider trading is trading a public company's stock based on non-public, material information. Regulating this maintains capital market trust and aligns with SEBI's mandates.

Evaluating the options:

• Protective functions: Safeguard investors. While SEBI protects, controlling insider trading is more than just protection; it involves regulation.
• Regulatory functions: Establish rules and frameworks for fair trading and market manipulation prevention. This accurately defines controlling insider trading.
• Developmental functions: Promote securities market growth, e.g., introducing new instruments.
• Preventive functions: Aim to avert future market issues. However, insider trading control involves broader regulatory oversight.

Consequently, SEBI's function in controlling insider trading and imposing penalties falls under Regulatory functions.