The establishment of SEBI was done to achieve the primary objective of creating such an environment, which helps in effective mobilization as well as the allocation of resources with the help of the securities market of India. Such an environment is bundled with policy frameworks, rules and regulations, infrastructures and practices in order to meet the requirements of various class of people which are the main players of the market. Some of them are the investors, the market intermediaries and the companies, which are the issuers of securities. For achieving the above-mentioned purpose, Section 4 of the SEBI Act provides for management of SEBI and leads to the creation of a Board of Members. All the powers required for the regulation of the securities market are vested with SEBI.
Similar to the board of directors of a company, the board of members are provided with all the powers in relation to management, direction and general superintendence for the regulation of the affairs of SEBI. The nominees of Reserve Bank of India, Ministry of Finance and Corporate Affairs and the appointees of Central Government forms the part of the members of the board under sec 4(1).
COMPOSITION OF THE BOARD
In the initial times, the Board of Members was comprising of six members, which included the Chairman and five other members. After SEBI (Amendment) Act, 2002, three more members were increased in the composition of the board of members to make it to a total of nine members. The presence of at least three whole-time members also became mandatory. The Central Government is empowered to make the appointment of the Chairman as well as the other five members, which included three whole-time members, from a total of nine members of the board. The Central Government is also entitled to make the appointment of two members belonging to the Ministry of Central Government, which deals with the administration and finance of the Companies Act, 1956. On the other hand, the remaining member gets nominated by the Reserve Bank of India. Unlike the members that get appointed under clauses (b) and (c) of the sub-section (1), there is no such provision which mandates that the appointment of the Chairman under clause (a) and the other members under clause (d) of subsection (1) needs to be from the class of people, who are officers of the government.
SEBI has also proposed to “restructure the Board to consist of a Chairman and eight other members, of whom at least one shall be an official of the MoF and at least three shall be Whole Time Members” without any further sub-classification as it is existing today. This was done so that autonomy can be further enhanced. In addition to it, it has also been proposed that “Rules should be framed to prescribe the manner of selection, experience as well as qualifications required for these positions and the remuneration so that the objectivity can be imparted to the process of appointment and selection of Members and Chairman”.
TERM OF OFFICE AND CONDITION OF SERVICE OF THE BOARD
The condition of service and terms of office for the Chairman and other specified categories of member, who are appointed under clause (d) of sub-section (1) of section 4, are laid down by way of rules with the help of sub-section (1) of section 5. The SEBI (Terms and Conditions of Chairman and Members) Rules, 1992 were laid down in this regard with the help of Securities and Establishment Board of India Ordinance, 1992.
The terms of office and conditions of service of the chairman and certain specified category of members ( as appointed under Section 4(1) (d) are provided in Section 5(1), by way of rules. In this reference, SEBI ( Terms and Conditions of Chairman and Members) rules 1992, were framed in reference to the Securities and Exchange Board of India Ordinance, 1992. Further, the chairman and whole-time members hold an office for a period of 3 years and can be reappointed by the central government, which is subjected to the maximum age limit of 65 years.
One term may be extended to a period of a maximum of 3 years while an appointment can also be for a lesser period. Any member appointed for part-time is also required to hold the office for a maximum term of 3 years but there is no age limit for them like the Whole Time Members and the Chairman.
The former chairman of SEBI i.e. Shri D. R. Mehta is the only person who was appointed for a continuous term of 5 years at one time because continuity of the chairmanship had become a necessity for transforming SEBI “from a fledgeling organization to a fully mature organisation”. However, there was no specific mention of Rule 20 of SEBI ( Terms and Conditions of Chairman and Members) rules 1992 in the order of appointment of Shri D. R. Mehta. The above-mentioned rule of SEBI ( Terms and Conditions of Chairman and Members) rules 1992 grants the power to the Central Government to relax the provisions laid down in said rules with respect to any category or class of persons.
The Delhi High Court had not considered such omission to be fatal. This was so because the notes of the Cabinet Secretary and Finance Ministry has made it very clear that the Central Government is conscious of the restriction for three years. In this regard, the Court has also noted that “the expression ‘class of persons’ or ‘category’ has very wide connotation and will also cover any relaxation granted in favour of any person similar to the case at hand.”
REMUNERATION TO THE BOARD
The salary of the Chairman is equal to that of a Secretary to Government of India while the pay of the Whole Time Member of the Board is equivalent to that of the Additional Secretary to the Government of India. On the other hand, a part-time member is entitled to receive a payment of rupees one thousand only for each meeting attended by him.
Sec 5 (2) empowers the Central Government to get the services of a member of the Chairman of the board terminated. This power of termination of services is limited and does not extend to the nominee members, who are appointed by virtue of clauses (b) and (c) of sub-section (1) of section 4.
REMOVAL OF MEMBERS
Although Sec 5 and sec 6 both speak about the removal, yet there lies a difference between both of them. Sec 5(2) uses the word ‘shall remove’ instead of the words ‘shall have the right to terminate’ as used in sec 6. This means that there is a mandatory obligation of removal on the Central Government if any member is a subject to any of the disqualifications as prescribed in sec 6.
The Securities Laws (Amendment) Act, 1955 is responsible for the omission of one of the disqualifications, which was provided by sec 6 (d). This omission was in consonance with the goal of appointing the experts of industry on the board of SEBI in order to utilize their expertise and experience.
The proviso to sec 6 makes it mandatory to provide an opportunity of hearing to the member sought to be removed in order to make compliance with the Principles of Natural Justice.
The criteria for removing and disqualification of the directors is prescribed by the sec 267, 274 and 283 of the Companies Act, 1956 and other disqualifications include the commission of offences of moral turpitude, unsoundness of mind and insolvency. If any member of the Board ever becomes subject of any of the disqualification as prescribed under sec 6, he/ she is required to provide the information regarding the same under Regulation 10 (1) of the SEBI (Procedure for Board Meetings) Regulations, 2001. Similarly, it is the duty of the board under Regulation 10 (2) of the SEBI (Procedure for Board Meetings) Regulations, 2001to inform the Central Government, if it receives any information regarding any member who has attracted the disqualification laid down under Sec 6.
The SEBI (Procedure for Board Meetings) Regulations, 2001 have been framed by virtue of Sec 7 (1). The said regulations provide that at least one meeting ought to be held in every quarter. In addition to it, only two members are required for requisition for getting a meeting convened at any time.
In the ordinary circumstances, a notice of ten days, as well as the agenda papers, has to be given unless the nature of the meeting is urgent. In the case of an urgent meeting, ‘sufficient’ notice is required to be handed over to the members so that they can attend the meeting. This resolution can be passed by the process of circulation. The quorum for the meeting consists of three members. It is not necessary to hold the meeting at Mumbai, where the head office of SEBI is located but it can be conducted at any place in India.
MEMBERS NOT TO PARTICIPATE IN MEETINGS IN CERTAIN CASES
Securities Laws (Amendment) Act is responsible for the insertion of sec 7A as well as deletion of the phrase “appointment as director of a company”, which formed the ground for removal of any member by Central Government under sec 6(1)(d). Even though the Parliament made the decision of utilizing the expertise and experience of experts of the industry, it has also inserted this provision to address all the situations of conflict of interest. The objective of this section is to remove any sort of biasness from the functioning of the board.
Non- participation in such cases is responsible for imparting objectivity and neutrality to the decision making a process in one or other way. This also leads to the generation of confidence not only in the minds of the general public but also in those entities who are affected by the decisions of such persons.
With the motive of enhancing confidence, transparency and objectivity in the process of decision making, the Board has adopted a ‘ Code on Conflict of Interests for Members of Board’ in one of its meetings. Notably, the Code lays down a mechanism for the public in order to notify the Board or Chairman by means of Secretary, in addition to the material evidence, of interests of a member in a specified manner.
Another necessary provision is that the Chairman, as well as other members of the Board, shall be such individuals, who possess no financial or any other interest which is likely to affect his function prejudicially either in present or in future.
OFFICERS AND EMPLOYEES OF THE BOARD
Sec 9(2) has led to the formation of SEBI (Employee Service) Regulations, 2001which governs the terms and conditions of services of officers and employees. The services on a contractual and temporary basis are also provided by these regulations. The abovementioned regulation classifies employers into various categories.
These regulations make it clear that every officer is a type of employee but vice versa is not true. All officers, employees and members of SEBI are deemed to be public servants under Sec 22 while Sec 23 provides them protection for anything done by them in good faith.
 Rule 3(2) of SEBI ( Terms and Conditions of Chairman and Members) rules 1992
 Rule 19A (2) of SEBI ( Terms and Conditions of Chairman and Members) rules 1992
 Note of Finance Ministry dated 03. 02. 1995. See also, Arun Kumar Agarwal v Union of India and Others,  100 Comp Cas 406 (Del).
 Arun Kumar Agarwal v Union of India and Others,  100 Comp Cas 406 (Del)
 Rule 4 (1) of SEBI ( Terms and Conditions of Chairman and Members) rules 1992
 Rule 4 (2) of SEBI ( Terms and Conditions of Chairman and Members) rules 1992
 Rule 19B (1) of SEBI ( Terms and Conditions of Chairman and Members) rules 1992
 Vide Notification S. O. 515 (E), dated 12. 06. 2001.
 Regulation 3 (1) of the SEBI (Procedure for Board Meetings) Regulations, 2001
 Regulation 3 (2) of the SEBI (Procedure for Board Meetings) Regulations, 2001
 Regulation 5 (1) of the SEBI (Procedure for Board Meetings) Regulations, 2001
 Regulation 6 (1) of the SEBI (Procedure for Board Meetings) Regulations, 2001
 Id. Para 13.
 Regulation 7 of the SEBI (Employee Service) Regulations, 2001
 Mohinder Singh v. State of Haryana & Ors. (1989) 3 SCC 93 where it was observed that officer is in a higher grade than an employee. See also, Sundaram Finance Limited v SEBI, Appeal No. 69/ 2010, SAT Order dated 16.09. 2010 where, in the context of regulations prohibiting insider trading, it was observed that officer is an individual who has the authority to give directions to other employees and also any person occupying a responsibility in a company.