The President of India on 31st Jan, 1992, exercised the powers which are conferred upon him by Article 123(1) of the Constitution of India to promulgate the Securities & Exchange Board of India Ordinance, 1992. After that this ordinance changed into an act which was Securities & Exchange Board of India Act, 1992. The objective behind enactment of such an Act was to protect the interest of the investor in securities and to develop and to promote the development of and to regulate the securities market.
Under Section 3 of the act it provided for establishment of Securities & Exchange Board of India whereas Section 4 of the act provided for establishment of SEBI Management Board.
Number of Writ Petitions was filed before different High Courts challenging the validity of Regulation 10 of the Securities & Exchange Board of India (Stock Brokers & Sub-Brokers) Regulation, 1992 read with Schedule III of the Regulation which was issued by the Securities & Exchange Board of India.