The Securities Exchange Board of India, otherwise known as the SEBI, regulates the operations of depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies. It can prohibit certain activities and unfair trade practices such as fraudulence, in the securities market.
Around the time when the Harshad Mehta scam took place, SEBI was still limited to certain powers. It regulated the securities market and made sure of its constant development. It did not have access or control over the transactions taking place between the investors and brokers.
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What Harshad Mehta had done in the stock market was not illegal, but it was a problem as Mehta obtained money to invest in the stock market by misappropriating banks’ money. While Mehta continued to do fraudulent activities within the stock market, SEBI seemed to be helpless, as it did not have access to the transactions being made between the investors and the brokers. The only person having the ability to check and regulate the matter was the Central Bureau of Investigation (CBI). After the government realized this matter, they took the action of promoting SEBI to “market regulators”, providing them with greater powers. SEBI was given the power to protect investors and the stock market from unfair trading practices, to healthily and lawfully develop and progress the stock market, and to be able to regulate the transactions made between brokers and investors.
So yes, the Harshad Mehta scam can have taken place without the support of SEBI. During that time, SEBI did not have many powers in the stock market and could not take any actions against Harshad Mehta. But now, it would be impossible for a scam like that to occur again as the powers of the SEBI are well-established.
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