Step 1: Why SEBI has protective functions.
SEBI was set up mainly to protect the interest of investors in the securities market, since ordinary investors cannot always tell when they are being misled or cheated. Its protective functions are the tools it uses to guard against exactly that.
Step 2: Prohibiting fraudulent and unfair trade practices.
SEBI keeps a close watch on practices like price rigging, where a group of operators artificially push a share's price up or down to make quick gains at the cost of genuine investors, and takes action against such manipulation.
Step 3: Controlling insider trading.
People inside a company, directors, promoters or employees, sometimes know price sensitive information before it becomes public. SEBI restricts such insiders from buying or selling shares using this unfair advantage.
Step 4: Promoting investor education and a fair practices code.
SEBI runs awareness programmes so investors understand risks before they invest, and it prescribes a code of conduct for brokers and intermediaries so that investors are dealt with honestly. Together these steps build investor confidence in the market.