12th Standard Commerce — Securities and Exchange Board of India (SEBI) Online Test
Chapter 8 of 12th Commerce explains the Securities and Exchange Board of India, set up in 1988 and given statutory powers in 1992. It covers SEBI's objectives, functions and powers, then explains dematerialization, its benefits, the demat account, how to open one and the documents required.
Study this chapter
About Securities and Exchange Board of India (SEBI)
Easy ~40 min study
Securities and Exchange Board of India (SEBI) is the eighth chapter of the Tamil Nadu State Board Class 12 Commerce book and the last lesson of Unit 3, Financial Markets II. It introduces SEBI as the apex body that maintains and regulates the Indian capital market and protects the interests of investors.
The lesson traces SEBI from a non-statutory body in 1988 to an autonomous statutory regulator under the SEBI Act 1992, then lists its four objectives, fourteen functions and six powers. The second half turns to dematerialization: how physical certificates become electronic holdings, why demat shares are fungible, and how an investor opens a demat account with a Depository Participant.
This page gathers the five book-back one mark questions, with answers checked against the lesson and the printed key, plus additional MCQs on dates, offices, insider trading, powers, demat benefits and documents, each with a short explanation.
What you'll learn
- State when SEBI was established and when it got statutory powers.
- List the objectives of SEBI.
- Describe the main functions of SEBI.
- Explain the powers of SEBI over stock exchanges and intermediaries.
- Explain dematerialization and its benefits.
- Describe how to open a demat account and the documents required.
Before you start
- The meaning of the capital market and stock exchange from the earlier chapters of Unit 3.
- Basic idea of shares, brokers and investors.
- The role of a bank account in holding money.
Topics covered in this chapter
Securities and Exchange Board of India (SEBI) explained
What this lesson covers
Origin of SEBI
SEBI was first established in 1988 as a non-statutory body. The Government of India made it an autonomous body on 12 May 1992, and Parliament gave it statutory powers through the SEBI Act 1992. Its headquarters is in the Bandra Kurla Complex, Mumbai, with regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.
Objectives
Regulation of stock exchanges, protection to investors, checking insider trading and control over brokers.
Functions
SEBI performs quasi-legislative, quasi-judicial and quasi-executive functions. It educates investors, registers brokers and other intermediaries, conducts inspections, bars insider trading and unfair practices, regulates mergers, mutual funds and capital issues, promotes self-regulation, trains intermediaries and levies fees.
Powers
Powers over stock exchanges and intermediaries, monetary penalties, initiating actions, regulating insider trading, powers under the Securities Contracts (Regulations) Act from the 13 September 1994 notification, and regulating the business of stock exchanges.
Dematerialization and the demat account
Physical certificates are destroyed and equivalent electronic securities credited through a Depository Participant. Demat trading began on the NSE in December 1996 and on the BSE in December 1997. The lesson lists ten benefits, the steps to open a demat account, its fees and the proofs of identity and address.
Common mistakes to avoid
- Giving 1992 as the year SEBI was first established. It was set up in 1988; 1992 is when it became statutory.
- Choosing 7 for the members SEBI nominates to a stock exchange governing body. The lesson says three.
- Placing demat trading on the NSE in 1998. It began in December 1996, and on the BSE in December 1997.
- Thinking a demat account needs a minimum balance of shares. It can be opened with no shares.
- Mixing up the regional offices: Northern is New Delhi, Eastern Kolkata, Southern Chennai and Western Ahmedabad.
Test yourself on these with the practice test, then check the worked reasoning in the solved MCQs.
Frequently asked questions
When was SEBI established?
SEBI was first established in 1988 as a non-statutory body for regulating the securities market. The Government of India made it an autonomous body on 12 May 1992, and it got statutory powers in 1992 when Parliament passed the SEBI Act 1992.
Where is the headquarters of SEBI?
SEBI's headquarters is in the business district of the Bandra Kurla Complex in Mumbai. It has Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai and Ahmedabad respectively.
What are the objectives of SEBI?
The lesson lists four objectives: regulation of stock exchanges so that efficient services are provided, protection to the investors, which is called the foremost objective, checking insider trading, and control over brokers and other middlemen in the capital market.
What is insider trading?
Insider trading is the buying and selling of securities by directors, promoters and others who have access to confidential information about the company and wish to take advantage of it. It harms general investors, so SEBI bars it and has power to regulate it.
What is dematerialization?
Dematerialization is the process by which an investor's physical share certificates are taken back by the company or registrar and destroyed, and an equivalent number of securities in electronic form are credited to the investor's account with his Depository Participant.
What documents are required to open a demat account?
The investor submits the account opening form, a passport size photograph, proof of identity such as a PAN card or voter's ID, and proof of address such as a ration card or bank passbook. Photocopies are submitted, but originals are needed for verification.
Last updated 16 October 2026