Discuss the role of SEBI in regulating an Initial Public Offering (IPO) in India. Include at least three specific functions performed by SEBI.
Answer
SEBI approves the draft prospectus, monitors compliance with disclosure norms, and ensures fair pricing through price band and underwriting regulations.
Step-by-step solution
- State that an IPO is the process by which a company offers its shares to the public for the first time.
- Mention that SEBI is the statutory regulator for securities markets in India.
- Explain the first function: SEBI reviews and approves the draft prospectus to ensure all mandatory disclosures are present.
- Explain the second function: SEBI monitors the company's compliance with continuous disclosure and reporting requirements during the IPO process.
- Explain the third function: SEBI sets the price band, oversees underwriting, and checks for any manipulation to ensure fair pricing for investors.
- Conclude by summarising these three functions as the key roles of SEBI in an IPO.
Common mistake: Omitting the price‑band regulation as a specific SEBI function
Concept tested: SEBI's role in IPO
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