Professional Documents
Culture Documents
Project Report
ON
To develop managerial and administrative skill, project has a significance role play in the
subject of business. It is necessary that we should combine our classroom learning with the
knowledge of real business environment.
Project work is conducted as an integral part of the management course as it provides an
opportunity to apply the theoretical aspect in practical. It gives on excellent opportunity to a
student to apply his ability, capability, intellect, knowledge, brief reasoning and mantle
ability by giving a solution to the assigned problem, which reflects his caliber.
(ADITY GUPTA)
ACKNOWLEDGEMENT
One of the most pleasant parts of writing a report is the opportunity to thank those who have
contributed to the successful completion of it. Unfortunately, the list of expressions of
thanks, no matter how extensive, is always incomplete and inadequate. These
acknowledgments are no exception to it.
In the accomplishment of a task with desired effects, co-operation, assistance guidance & all
motivation were must while com of plating my project. I enjoyed all these from all who were
assistance with the field directly or indirectly. So, it becomes my prime duty to thank all
those who showed me the way & helped me in completing my project especially whole time
to time helped me a lot.
I wish to acknowledge the support, assistance and co-operation given to me by the personnel
at KAIM, Ch.Dadri. Words are not sufficient to express my gratitude towards my project
guide Mr. Anand Gupta, without whose help & Constant scholarly guidance this project
could have not been successful. I also wish to thanks to Prof. L.N. Dahiya (Director,
KAIM), Mrs. Supriya Dhillion (Add. Director, KAIM) & Mr. Sachin Suhag (TPO,
KAIM) fort their co-operation & help.
(ADITY GUPTA)
Contents
1. Significance of the study
3. Conceptualization
Industry profile
Company profile
6. Research methodology
Research design
Sample design
Collection of data
Analysis of data
8. Organization of study
10. References
Introduction
Investor protection is as important an issue in India today as it was in 1980s and 1990s but
the whole complexion of the problem has changed.
The structure as well as the functioning of the Indian securities market has been transformed
beyond recognition since the 1990s. The profile of the investing public, the investment
choices available, the market environment and the nature of problems bothering the investors
are substantially different today from what they were 10-20 years ago.
The Ministry of Company Affairs had sponsored this massive study under the Investor
Education and Protection Fund (IEPF) with the object of creating a deeper understanding of
the ordinary investors’ concerns, problems and needs.
The first five months of the calendar year has seen a total addition of 7.52 lakh new investor
accounts by the country’ two depositories, taking the total numbers of investor accounts to
above 75 lakh, according to the data available with the depositaries.
Introduction of Investor:
An investor in securities is people who identify himself with the national economy. One
who invests in the growth of economy? One who risks a portion of savings, and invests in
those sectors, which are likely to grow in tandem with the economy or faster than that.
An investor in securities can their fire be defined as a person who invests his invisible
surplus in securities, with the following objectives:
o To contribute his savings to the productive sectors of economy;
o To help entrepreneurs in successful implementation of projects undertaken by them,
by providing risk capital;
o To earn a sustained stream of returns on successful implementation of the projects;
o To obtain capital appreciation over a period of time.
An investor is interested in true value of the enterprise, unlike speculator, dealer & jobbers
who are primarily interested in periodic movement in the market price of securities.
For making investment, investor needs:
Sufficient avenues for investment
Adequate information to analyze the relative strength of various enterprise;
A well regulated intermediary network that facilities easy entry &exit from an
investment;
Access to information about the regulatory framework and market mechanism
Strict monitoring mechanism for immediate checking of errant players; & efficient
redressal system for his grievances.
Types of investors
The growth in the numbers of investors in India was encouraging. The trends revealed that in
addition to FIIs and Institutional Investors, small investors were also gradually beginning to
regain the confidence in the capital markets that had been shaken consequent to the stock
market scams during the past decade. It is imperative for the healthy growth of the corporate
sector that this confidence is maintained.
The concept of investor protection has to be looked at from different angles taking into
account the requirements of various kinds of investors i.e. (i) investors in equity (ii) large
institutional investors (iii) Foreign Investors (iv) investors in debentures and (v) small
investors/deposit holders etc.
1.)Individual investor :An individual who purchases small amounts of securities for
him/herself, as opposed to an institutional investor. Also called retail investor or small
investor.
2)Institutional investor: Entity with large amounts to invest, such as investment companies,
mutual funds, brokerages, insurance companies, pension funds, investment banks and
endowment funds. Institutional investors are covered by fewer protective regulations
because it is assumed that they are more knowledgeable and better able to protect
themselves. They account for a majority of overall volume.
3) Founder Capital and Love Money investors: These sources include money in the bank,
certificates of deposit, shares and bonds, cash value in insurance policies, real estate, and
home equity and pension funds. Love money investors are your family and friends. If you
borrow from relatives and friends, make sure to spell out clearly the terms of the funding
agreement (including the date, amount of the loan, interest rate, repayment schedule,
collateral, signatures) to avoid future problems and disagreements.
4) Angel Investors: In general, angel investors are wealthy people, such as retired
entrepreneurs and executives, who want not only to invest money but also to contribute their
valuable business experience. Others are wealthy professionals, such as doctors or lawyers,
who prefer to take a passive role in a business.
Angel investors are hard to find because they don't advertise their willingness to invest.
You'll typically need a referral from a financial advisor or other professional who has
established contacts with these individuals. Angel investors will invest between $25,000 to
$250,000 in small and medium-sized businesses. Generally they provide equity financing
and look for a return on their investment of about 30%.
Investor protection
The basic objectives of regulatory body with body with reference to the investors of the
securities are protection of the interest of the investors and education of investors. As far as
the first objective and the steps taken by the regulatory body is concerned, there is doubt that
in the shortest span the regulatory body has taken important steps to discipline the market
intermediaries and other market participants. The steps are taken this regard by regulatory
body could not fully protect the interest of the investors of the securities it might be due to
the fact that the different authorizes are vested with the statutory powers to regulate different
functions aspects of activates relating to the capital market.
As far as education of investors is concerned, there is no doubt that regulatory body has
taken effective steps toward education of investors, making available the activities to the
capital market to investing public and also guiding the investors through various investor
guidance and active participation by the investor’s associations. The future programs of
regulatory body seem to be encouraging various statutory organizations and the training of
the intermediaries to pave the way for adequate investor’s protections.
Three things need to be done to enhance the investor’s confidence in the market
mechanism and protect his interest:
• Make investor aware and educated enough to understand technical, regulatory
and producural aspects of the investments.
• Make necessary information available to the investor in a manner he
understand it, so that he can take informed investment decisions.
• Frame and implement regulations in a Manner that the chances of
malpractices and reduced to minimum
Also, the investor should himself also observe the following while investing:
o Obtain written documents regarding investing
o Read and understand such documents
o Find out the costs and benefits associated with the invested
o Assess risk-return profile of the investment
o Know the liquidity and safety aspects of the investment
o Deal only through a sebi registered intermediary
o Explore alternative options in case something goes wrong with the
investment.
There are various investment choices to the investors in the market. They are:
Equity shares:
o Equity shares are primarily volatile instruments
o They yield returns in terms of dividends and equity shares depends upon the
trading volume o the share.
o Company ‘s performance should be monitored closely to track the investor’s
performance.
o It is possible to buy even a single share in dematerialized mode.
Bonds
A bond is a loan given by the buyer to the issuer of the instrument. These are dept
instruments. Over and above the scheduled interest payments as and when
applicable, the holder of a bond is entitled to receive the par face value of the
instrument at the specified maturity date.
Debentures
Debentures are also dept instruments:
o Dept instrument are required to be rated by created rating agencies.
o Investor should track the rating of the same.
Mutual funds
o Professionally managed
o Provides diversification of portfolio
o Liquidity
o Transparency
o Choice of securities
o Regulated by sebi
Evaluation of investment choices
An investor should keep in mind various investment choices available to him along with the
risk and returns associated with each one of them and evaluate the securities on the
followings criteria:
o Liquidity
o Safety
o Returns
o Tax savings
o Whether active involvement of investor is required to manage the investment
o Minimum amount that can be invested.
The investor should consider following factor before making investment in securities:
o Whether there is a regulatory framework in place in respect of the securities
o Whether the offer of the security is in compliance with the due process of law
o Whether the transaction has any counter party risk
o Whether the security can be liquidated into cash easily
o Whether the security will generate returns compatible with its risk.
o Whether the security fits into your investment portfolio and meets your investment
goals.
Rights of investor
o To receive document regarding your investment
o To demand certificate of registration of concerned intermediary
o To receive the security corporate benefits i.e. dividends, rights, bonus,
interest /redemption etc.
o To participate and vote in general meetings
o To receive annual reports etc.
o To apply for winding up of a company, if need be, etc.
Investor’s responsibility
It is important for the investor to understand that if he has so many rights as a
shareholder in the company, he has also certain responsibility to discharge and they
are:
o To remain informed
o To be vigilant
o To participate and vote in general meetings
o To exercise his rights in his own or as a group
o To pay/deliver securities as and when called upon to do so.
Several avenues are available for investment. “Don’t put all your eggs in the
s a m e basket”. One has to choose different instruments as per his requirements, savings,
and age group. Youngsters can invest little more percentage of his savings in risky equity
instruments.
The person getting retirement compensation would like to go for safe, steady instrument,
giving regular income, cash inflow. He following Table is given showing some of the
available instruments along with its pros and cons.
WHERE TO INVEST?
Financial Ratios
= Gross Profit-Tax
No of Equity Shares
BSE has established a full-fledged Investors’ Services Cell (ISC) to redress Investor’s
grievances. Since its establishment in 1986, the Cell has played a pivotal role in enhancing
and maintaining Investors’ faith and confidence by resolving their grievances either
against listed companies or against Members of the Exchange. The services offered by the
ISC are as under:
ISC forwards the Complaints to the respective company and directs them to solve the
matter within 15 days. In spite of the above efforts, if the company fails to resolve the
Investor’s Complaints and the total no. Of pending complaints against the company
exceed 25 and if these complaints are pending for more than 45 days, after issue of show
cause notice for 7 days the Scrip of the company is suspended from trading till grievances
are resolved. ISC also transfer’s such Scrip’s to ‘Z’ category for non-resolution of Investor
Complaints.
ISC takes many other pro-active measures to resolve the Investor’s grievance such as:
Calling the Company representative to the Exchange to interact with Investor’s / Members
to resolve the complaints.
Calling major Registrar & Transfer agent to the Exchange to interact and resolve the
grievances of the Investor’s and Members of the Exchange.
Issuing monthly press release listing top 25 companies against whom maximum
complaints are pending for resolution. The same is also released on the website of the
Exchange.
Pursuing Mumbai based companies to depute their representative to the Exchange to take
the pending list of complaints & resolve the same immediately.
ARBITRATION
The Investors complaints referred by IGRC can be against the (i) active members of the
Exchange as well as the (ii) defaulter-members of the Exchange. The process of solving
the Investors complaints through the arbitration procedure are as mentioned below:
Arbitration Procedure
For the purpose of resolution of grievances between Investors and Member-brokers, the
Exchange has constituted an Arbitration Committee with the approval of SEBI.
The non-member arbitration panel consists of retired High Court and City Civil Court
judges, Chartered Accountants, Company Secretaries, Solicitors and other professionals
having in-depth knowledge of the capital market. On receiving the direction for arbitration
from the IGRC, the complainant (applicant) files relevant supporting documents for
arbitration. A set of the arbitration documents is sent to the other party (respondent) for
giving his counter reply. After completion of the formalities, the matter is fixed for
hearing before arbitrators. For claims less than Rs.10 lakhs, the applicant has/have to
propose the name of three arbitrators and the respondent(s) has/have to consent on the
name of one of the arbitrators. In case the respondent(s) does/do not consent on the
arbitrator, the exchange appoints the arbitrator to adjudicate the matter. For claims above
Rs.10 lakhs, a panel of three arbitrators, one each to be appointed by the applicant(s) and
respondent(s) and the presiding arbitrator has to be appointed by the exchange to
adjudicate the matter.The date for hearing is fixed and the concerned parties are informed
about the date through notices. After hearing both the parties and taking the submissions
and the documents on record, the arbitrator(s) close the reference and the award (decision)
is given
Appeal: If the applicant is not satisfied with the award he can appeal against the same in
the Exchange within 15 days of the receipt of the award. The appeal bench of five
arbitrators hears the matter and gives the award
However, the aggrieved party has to deposit the awarded amount given by the Arbitral
Tribunal with the Exchange unless and until the appeal bench exempts it partly or wholly.
If the award is in favor of the applicant, the active member has to abide by the decision. If
he fails to abide by the award, the Disciplinary Action Committee (DAC) takes necessary
action against him. The award becomes a decree after three months from the date on
which it is given and can be executed as a court decree through a competent court of
jurisdiction. The same can be challenged only in the High Court of Judicature, Mumbai.
Investors feeling small, not able to have access, approach the Grievances
Redressal System of the Capital Market. India in post liberalization period has enacted
enough laws, made sufficient provisions, given full authority to all regulators. It is
SEBI, whom everything is given by the policy-makers, Parliament, which they were
requested, RBI has asked for both, an institution to draft monitoring policy and also
regulators for the banks and NBFCs. DCA also wanted both, wanted to become, remain
policy-makers, executive and also to have full power, authority as regulators.
Now the States enacts law. Now States are also acquiring powers, giving the powers and
authorities to the State Home Department, to the Collectorate, to the Revenue Ministry,
to the Police, enacting Investors’ Protection Act to control, regulate and punish the
finance scamsters, unorganized schemes, ‘‘Ek ka Double Schemes’’.
New regulators are entering in the arena. IRDA already established. New regulators for
Pension Funds, Commodity exchanges are being mooted. Pension Fund Ordinance
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issued on 30 December 2004.
All the regulators, power, authorities, laws are made, enacted to “Protect Small
Investors”, but today the small investor feels helpless, hopeless and unsecured.
In the following paragraphs of the study the status of Small Investors’’ Grievances
Redressal System explained in detail. What is the system? How it can be
approached? How they are responding to the Small Investors’?
The “Small Investors’ Protection” is a new phenomenon. The need arisen only after and
due to the economic liberalization. Urgency felt with the opening of Capital
Market. The Small Investors’ Protection concept is the contribution of
Investors’ associations like IGF, CERC and of the media and journalist like Ms. Sucheta
Dalal. Of course in the developed economy like USA also there are activists,
organizations fighting for Small Investors’ Protection.
PETITION TO THE PARLIAMENT
Investors’ Grievances Forum had file a petition to Parliament on behalf of Small
Investors in early 2000. This was the first time the status of Small Investors, the
Small Investors’ Protection system, the status of grievances redressal in India was
brought to the notice of the highest policy making body in the country. The petition was
th
presented to the Lok Sabha on 10 March 2000. The Petition itself speaks the status of
Small Investors’ and redressal system in the country. The petitioners Shri Shailesh
Ghedia and Shri Bharat Kotecha, both office bearers of IGF had submitted the petition to
the Parliament. The text of the petition is:
THE PETITION
“We the undersigned petitioners are office bearers of the registered investors’ association
working in various parts of India. The Securities Exchange Board of India also
recognizes us, which is responsible for regulating and protecting the Small
Investors’ in the Capital Market. We are working to protect the Small Investors’
throughout India.”
The Capital Market and the number of Small Investors have increased rapidly during the
last one decade. The number of Small Investors’ was only thirty lakhs in the 1960s, &
it has gone up to 6.30 crores in the year 2000.Opening up of the Capital Market
through privatization, liberalization and globalization encouraged investors to
invest in the share bazaar, in equities and people invested the savings of their life
with the shares and equities of the various companies.
But while opening the Capital Markets, the concerned authorities, including the
Government, have not framed the rules to regulate the same. In India there is no
machinery to protect the Small Investors’. In the last several years several security scams
broke out in India, namely: -
1. Harshad Mehta Security Scam of 1992-93
2. Non-banking Financial Institutions (NBFCs) Scam
3. Plantation Companies Scam
4. Chain Investment Schemes Scams such as “‘Ek ka Double Schemes’” or “Double
your money” etc.
Losses Suffered By Small Investors
It is felt that more than 50,000 crores worth of savings of retired pensioners, women,
widows and people of the salaried class were either looted or locked up in these scams.
But there has been no action for the recovery of the money. Till today, none of the Small
Investors’ have got a Single paisa back. There has been no action against all these
unscrupulous scamsters. Justice delayed is justice denied.
We have used all the tools available under a democratic set up, that is, we have
approached the State as well as the Central Government, the SEBI, the Reserve Bank of
India, the Company Law Board, the Department of Company Affairs and the
Securities Exchanges, but nothing happened.
We, therefore, submit this petition before you and request you to urge upon the Ministry
of Finance and the Union Government to take action to protect the interest of the Small
Investors’ and also to come out with a time-bound action plan.”
Small Investors’ are required to submit their grievances, complaints to different
agencies, and regulators as explained in the Chart/Table. Law maker have evolved
different Regulators for different financial instruments. Complaints about particular
financial instrument with correct Regulator, eg. complaint against the broker, sub-
broker can be filed with two different agencies, (i) Stock Exchange (ii) SEBI. If
the transaction is of secondary market, i.e. sale or purchase of shares from the
Stock Exchange, the concerned Stock Exchange is to be approached initially.
Stock Exchanges are having Investors’ Grievances Cell. In case of default by the
Broker, investment protection fund is made available to make payment to the
Small Investors’.
Maximum ceiling under Investor Protection Fund of BSE and NSE is Rs.10,00,000/-
per Small Investor. Stock Exchanges also have arbitration mechanism. If the
differences cannot be settled by the Department in the Department both the
concerned aggrieved parties are requested to approach arbitrator. BSE and NSE are
having very efficient scientific mechanism of arbitration.
One can go in appeal against arbitration decision to the Board of Stock Exchange or
has to approach SEBI. Now with the recent December 2004 amendment the Stock
Exchanges have been brought under the purview of SAT.
The grievance letters received by SEBI from investors have been categorised as under:
During the month, BSE Ltd. received 560 complaints against 359 listed companies. In
the same period 1060 complaints were resolved against 533 listed companies. These
resolved complaints include complaints brought forward from the previous periods.
I 60 0 60 50 1 51
II 97 0 97 86 9 95
V 77 0 77 66 2 68
The complaints received by BSE Ltd. from investors have been categorized as under:
Type I: Non-receipt of refund orders/allotment letters/stock invests.
Type II: Non-receipt of dividend/interest
Type III: Non-receipt of share/debenture certificates after transfer/
endorsement/conversion and bonus shares.
Type IV: Non-receipt of Annual Reports, right forms/interest on delayed receipt of
refund order/dividend, etc.
Type V: Non-receipt of credit with Depository Participants.
Survey of literature
Various surveys have been undertaken by various agencies, institutions during last
twenty years. In 1999/2000 SEBI has also undertaken, supported a survey to
understand the nature of investment, concept of investment, psychology of
Investors in India. Institutions like, Society for Capital Market Research and
Development, Delhi, are conducting the survey regularly. NGOs / Investors’
Associations also undertake survey to explain status of Small Investors, Small
Investors Protections System.
Three different Surveys are given to understand psychology, status of Small
Investors and that of Indian Capital Market.
Survey of Indian Investors conducted by Securities and Exchange Board of
India (SEBI) & National Council of Applied Economic Research (NCAER) –
1999/2000
Survey regarding Problems of Small Investors and Measures to
Safeguard their Plights -2003 (Research Study Sponsored by: IEPF, Department
of Company Affairs, Ministry of Finance, Govt. Of India), Research Report
prepared by Prof. Sri Ram Khanna with Paramjeet Singh, Vanita Tripathi the
(Voluntary Organization in the Interest of Consumer Education) VOICE Research
Team, New Delhi.
Survey of Indian Share Owners –1991, by Society for Capital Market
Research and Development, Delhi.
Survey of Indian Investors conducted by Securities and Exchange Board of India
First time a major survey was undertaken to understand the status of Small
Investors and Capital Market in India. A massive Survey conducted by National
Council of Applied Economic Research on behalf of SEBI was undertaken in
the year 1999-2000. It s report says:
“The Indian securities market has undergone a substantial and speedy change in the
last few years. Indeed its present form and content hardly bears any resemblance
with its earlier state. And for the investor population, no recent estimate has been
available for want of a detailed scientific enumeration.
This has handicapped SEBI, market intermediaries, researchers and
investors in deciding their policies and investment choices respectively.To
overcome this problem SEBI requested the National Council of Applied
Economic Research (NCAER) and agency known for its expertise and
experience in conducting objective and large scale household surveys, to
undertake a survey of the Indian investors. Primary objective of survey was to
have a demographic profile of investors and investor households investing both
directly and indirectly. This was expanded also to find out the investment
preferences, perceptions about risks in investments, level of awareness and
experience of investors while investing in the Indian securities market and the
reasons which inhibit some household from investing in the securities market.
Survey regarding Problems of Small Investors and Measures to Safeguard
their Plights - 2003 (Research Study Sponsored by: Department of Company
Affairs, Ministry of Finance, Govt. of India), Research Report prepared by Prof. Sri
Ram Khanna with Paramjeet Singh, Vanita Tripathi and the (Voluntary
Organisation in the Interest of Consumer Education) VOICE Research Team, New
Delhi.
DR. N.L. MITRA COMMITTEE ON SMALL INVESTORS’ PROTECTION
The Committee touched the subject of various regulators and the Grievances
Redressal System. As stated earlier about the petition filed by Investors
Grievances Forum on the ‘Small Investors’ Redressal System – Status’ the
Government, MOF, SEBI appointed a Committee to look into the status and
suggested the measures about the Grievances Redressal System and measures for
Small Investors’ Protection. Dr. N.L. Mitra of the Central for Business Law Studies,
Bangalore was appointed as Chairman of the Committee. Dr. Mitra Committee
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submitted its report on 17 April, 2001. In its report the Committee felt need for a
separate Act for Investor Protection.
Dr. N.L. Mitra report has observed that the provision regarding protection
of investor’s interest is spread over various Acts. Investment in securities is
covered by the Securities Contract (Regulation) Act and the Securities and
Exchange Board of India. If securities are related to incorporated
companies then the Companies Act is involved.
The Act also envisages appointment of Special Courts.
The Committee also suggested to form an Agency for providing
compensation.
The problem of investors’ protection arises due to following factors: -
(i) Persons or entities raising funds for specific purposes but not applying the
fund for that specific purpose or applying the fund for different purposes without
the consent of the people supplying the fund either negligently or
intentionally.
(ii) Raising the fund knowingly that the fund shall not be used for the purpose of
which it was raised and shall be diverted.
(iii) Raising public funds by cheating or committing breach of trust.
SMALL INVESTOR PROTECTION BY Kiritsomaiya
Various suggestions, public debates are going on to strengthen and simplify the
redressal system. The consumer forum provides an expeditious remedy to who has
suffered loss on account of deficiency in goods/services purchased by him.
A similar arrangement is called for redressal of investor grievances, given the rate of
disposal of our judicial system. The investor forum as well as other authorities should
have power to dispose of the cases summarily and to award compensation to the
investor. It is not enough if the culprit is punished. The culprit needs to be
punished in an exemplary manner, while investor should have means to
recover his loss caused by the culprit
Suggestions to compensate the financial losses of Small Investors’ are being
discussed and demanded by the Investors’ Associations. The depositors are
protected upto Rs.1 lakh in the event of liquidation/bankruptcy of a bank. This
protects innocent depositors and thereby contributes to the stability of the financial
system. A similar mechanism may be developed to compensate an investor upto
Rs.5 lakh if he suffers a loss on account of the failure of the system or mischief by
any market participant.
Investors’ Activists-Authorities & Redressal System by Sucheta Dalal
Financial Journalist cum activists like Sucheta Dalal is consistently
suggesting “Centrally Available Information System – Redressal System and
Avenues” is made available to the Small Investors’. NSE has also expressed their
opinion in favour of such Central Information Depository System.
An investor normally deals in securities through an intermediary, whose acts of
omission and commission can cause loss to him. In order for the investor to
choose the right intermediary through whom he may transact business, it may be
useful to help him in taking informed decision by making details of intermediaries
available to him. The details may include the form of organization, management,
capital adequacy, liabilities defaults and penal actions taken by the regulator
and self-regulatory organization against the intermediary in the past other
relevant information. Similarly the details about the issue should be
available to the investors.
Investors’ Associations and activists have made several suggestions
regarding the Grievances Redressal System and Regulatory System.
Shri A.K.Narayan committee on Tamilnadu Investors’ Association
As far as the Grievances Redressal System is concerned it is really in shambles.
Hardly anybody wants to take the responsibility to solve the investors’
complaints. They are made to run from pillar to post and also made to spend
money though they get nothing in return.”
“There are too many market Regulators, namely RBI, SEBI/DCA and so
on.We don’t understand the need to have different regulators to solve investors’
problems. So my suggestion is that there should be a body like SEBI, who will be
in a position to solve all the investors’ grievances/ problems. There should be a
standard committee in SEBI comprising of SEBI/RBI/DCA to look into investors’
complaints every month.”
Role of NGOs in Investors education
Many problems relating to investors, particularly, small investors can be tackled by
educating the investors. Small investors should be encouraged to either invest through
Mutual Fund mechanisms, or should take investment decisions only after getting
adequate information about risks and rewards. The investors should also be
encouraged to participate in the proceedings at general meetings (either physically or
through postal ballot, including by electronic media) in a constructive manner. This
requires improving the general awareness of the investors through informal
mechanisms. The help of various NGOs engaged in investor protection activities
should also be taken for this purpose. The Committee perceives a positive role for
Investors’ Associations / NGOs in this regard which should be supported by both the
Government as well as corporate entities.
Article, by suchetadalal.
The judiciary will have to help the investors cause - (5 November 2000)
Such funding is imperative for building up investor associations – particularly in
smaller towns such as Jodhpur, Hyderabad, Kanpur, Coimbatore, Chennai, Jaipur and
Patan. But nine recognized associations couldn’t begin to address investors’ needs. If
India has 23 stock exchanges, it stands to logic that there should be at least as many
strong investor associations in the country. Instead, Mumbai which headquarters four
stock exchanges (BSE, NSE, OTCEI and the Integrated Stock Exchanges of India)
has one politically backed association, which derives most of its clout from its main
promoter—Bharatiya Janata Party MP, Kirit Somiaya.
The problem is that investor groups need seed money to commence their activities,
establish a record of accomplishment and to achieve the minimum acceptable
membership. It is only then that they are eligible for accreditation and monetary
grants.
The problem is that investors are unwilling to join investor groups because most of
them have a pathetic track record. Until recently, SEBI also treated Investor
associations as a necessary evil, rarely consulted them and refused to allow them
more than a token role in the process of framing regulation.
There is a similar problem with the way the judicial system functions and perceives
investor issues. Not only is litigation a slow and expensive process, but even in the
few cases where courts have ruled in favor of investors (including consumer courts)
the relief and costs granted to them are so niggardly that they only acts as a deterrent
to investor litigation.
The Department of Company Affairs committee
The corporate world has also responded in a positive and pro-active manner. Policy
reform has been the main focus of the Department ever since the Government took
the road of liberalization and globalization.
The Department is engaged in the exciting task of making the Indian companies to
excel in a globally competitive market, create wealth for the shareholders and to the
nation by creating an investor friendly environment.
A Committee has been set up to propose a modern competition law in the light of
international economic developments and the need to promote competition, relating to
competition law including law relating to mergers and de-mergers. The Committee
consists of experts and is headed by Shri S.V.S. Raghavan. The Committee would
inter-alia recommend suitable legislative framework, changes relating to legal
provisions in regard to promotion of competition, trade practices as well as
appropriate administrative measures.
Similarly a Committee to draft legislation for formation and conversion of
cooperative business into companies has been set up under the Chairmanship of Dr.
Y.K. Alagh. The Committee would examine the feasibility of framing a legislation,
which would enable incorporation of cooperatives as companies and help conversion
of existing cooperatives into corporate entities and provide necessary legal
framework. The Committee will give its report shortly.
SIPC/INVESTOR PROTECTION TRUST SURVEY
Two of the few "bright spots" in the survey findings had to do with account
statements and diversification. In responding to a key behavior question, nine in 10
investors said that they regularly review their brokerage account and/or mutual fund
statements. A number of organizations -- including SIPC -- have placed a major
emphasis on the need for investors to protect themselves by reviewing brokerage
account statements in detail. On the knowledge side of the survey, nearly three out of
four investors (74 percent) showed that they understand the concept of diversification,
which has been a major focus of investor education efforts by the Investor Protection
Trust and other groups.
SIPC President Stephen Hardback said: “We are encouraged that people understand
the need to go over their account statements carefully to make sure that everything is
in order. But these findings indicate just how big a job remains in front of
organizations such as SIPC that are committed to investor education. When four out
of five Americans mistakenly think that there is an agency out there somewhere that
‘insures’ them against investment fraud losses, we obviously have our work cut out
for us.”
Survey conducted by Secretary of State Todd Rokita for Investor Basic Training
It's a time-tested truth that education is the key to success in nearly all areas of life—
including investing. Consumers that make informed investment choices are
significantly less likely to fall victim to fraud, and in turn, less likely to lose
their money in unsound investments.
Unfortunately, a statewide survey conducted by Secretary of State Todd Rokita shows
that nearly two-thirds of Indiana adults who own financial investments have
little or no knowledge about potential fraud schemes or the security of such
investments.
To help combat this problem, we have included some helpful information and
valuable resources for current investors and Hoosiers who may be considering
investing in the future.
Indian Household Investors Survey -2004
The Investor Education and Protection Fund constituted u/s 205C of the Companies
Act has been engaged in the education of investors in India. Various activities have
been undertaken by the IEPF. Prof L.C. Gupta, former member SEBI conducted a
survey of ‘Indian households’ Investment Preferences’, which probably sets the
record straight on several issues. He found that the number of investors in India is
stagnating since 1997 and that just about 18 per cent of the investor population thinks
that the Indian stock market is a ‘good place for long-term investment’. Also,
investors say that reforms have made the secondary market safer but the new issue
market is much riskier—this is the exact reverse of their perception a decade ago. The
IPO market is in the doldrums since 1996 except for the IT bubble of 1999-2000. In
order to understand the behavior of small investors in India, a Survey was conducted
under the aegis of the IEPF.
The JPC report however suffers from a very serious weakness. This weakness pertains
to the failure to establish the contribution of the nexus between brokers, bankers and
most importantly corporate entities. Not that the JPC was unaware of this serious
lacuna in their findings. It states candidly - "This Committee holds that even as there
are valid reasons to believe that the corporate house-broker-bank-FII nexus played
havoc in the Indian capital market through fraudulent manipulations of prices at the
cost of the small investors, this Committee were severely handicapped in the matter of
making any purposeful recommendations because of non-availability of required
support from concerned regulatory and other bodies with necessary material. This
issue acquires added importance in view of the recommendations of the 1992 JPC
regarding the urgent need to go into this unhealthy nexus of corporate entities-
brokers-banks and others".
So far as the enquiry by the regulators, the Committee had to make good with the
manner in which these regulatory bodies were conducting their enquiries. This has
been noted with anguish by the Committee - "SEBI furnished four sets of interim
reports inclusive of its investigation regarding scrips of certain corporate bodies. The
Committee's insistence for SEBI's final findings regarding the role of
promoters/corporate bodies in the price manipulation of the scripts yielded yet another
set of reports most of which were again of interim nature and were received as late as
in November 2002. Due to non-availability of final report from SEBI, the Committee
could not have the opportunity to take oral corporate bodies".
Main Committee Apex Committee
There is a Committee (Commonly referred to as Main Committee or Apex
Committee) to administer the IEPF. Pursuant to Section 205C(4) read with Rule 7 of
the IEPF Rules 2001, the Central Government has constituted a Committee vide SO
No. 125(E) dated 28-1-2004. Secretary, Department of Company Affairs are
Chairman of the Committee. The members are representatives of Reserve Bank of
India, Securities Exchange Board of India, and experts from the field of investors?
Education and protection.
Recent research studying the link between law, and finance has concentrated on
country-level investor protection measures, and focused on differences in legal
systems across countries, and legal families. The authors extend this literature, and
provide a study of firm-level corporate governance practices across emerging markets,
and a greater understanding of the environments under which corporate governance
matters more. Their empirical tests show that better corporate governance is highly
correlated with better operating performance, and market valuation. More important,
the authors provide evidence showing that firm-level corporate governance provisions
matter more in countries with weak legal environments. These results suggest that
firms can partially compensate for ineffective laws, and enforcement by establishing
good governance, and providing credible investor protection. It also Show that firm-
level governance, and performance is lower in countries with weak legal
environments, suggesting that improving the legal system should remain a priority for
policymakers.
Investor protection and demand for equity by
Stockholm School of Economics
This paper develops a simple equilibrium model showing that investor protection has
an impact on stock market development also through the demand for equity. A joint
rationale is provided for the lower returns of weak corporate governance stocks and
investors' portfolio decisions. In this model, investor protection affects how a firm's
cash flows are divided between security benefits, which accrue to all shareholders
pro-rata, and private benefits, which only the controlling shareholders have access to.
This division in turn affects the prices that different classes of investors are willing to
pay for their stocks.
The Federation of Indian Chambers of Commerce and Industry (Ficci) and the
Society of Indian Law Firms (SILF) Research Paper on securities market regulations
has suggested wide-ranging measures to streamline the operation of the Sebi Act,
regulations on buy-back of shares, takeover code, insider trading, public deposits and
the role, responsibility and accountability of independent directors. These issues
assume importance in the light of developments taking place in the capital market.
The study shows that the Indian capital markets have witnessed significant reforms on
the structural, operational and regulatory front over a period of time and made Indian
markets comparable to many developed and emerging markets.
Some of the findings and suggestions of the paper are:
• On the question of public deposits it argues, defaults should not be cognizable
offence as these are by very nature unsecured, are driven by risk and reward
trade offs and points out that fraud, irrespective of profit or loss, should be
punished.
• Sebi and ministry of company affairs should make a distinction in terms of
defaults.
• For investors’ protection, the use of modern technology, Internet, computers
should be enabled to enhance the efficiency of the disclosure process.
RESERCH METHOLOGY
Investor protection is as important an issue in India today as it was in 1980s and
1990s but the whole complexion of the problem has changed. Investor protection
Education Foundation is a natural outgrowth of the long term-standing mission to
protect investors and uphold the integrity of the markets. Investors need a better sense
of what they are doing and why. At the Foundation, we meet this need by funding
innovative research and educational projects aimed at segments of the investing
public who could benefit from additional resources.
• Expand the body of knowledge and/or provide practical materials that will
have a positive impact on investor education or protection
• Research methods to improve disclosure to investors about investments and
financial services
• Encourage investors to check the background of financial professionals prior
to doing business with them
• Empower the nation's young people that are about to enter the workforce to
better prepare for retirement and to meet other financial goals
st
1990 to almost Rs.15, 00, 000 Crores in 21 Century, a series of scams during the
same period caused concern to small investors, regulators and policy makers.
Investors need to understand that the agency would investigate complaints from a
regulatory perspective only and there can be no assurances that formal charges will
be filed against the broker.
OBJECTIVES OF THE STUDY
To study the Sebi guidelines for Retailer investor
To determine the role of stock exchange for investor protection
To analyze the shortcomings of the stock exchange regarding investor
protection
To assess the satisfaction level of investor regarding investor protection
To evaluate the role of the broker with regard to sebi guidelines for investor
protection
Our sampling procedure was designed to overcome the problem due to widespread
reluctance to disclose personal income and investments. Our method of sampling is
good enough to give a feel of the entire system by covering the main stream of
investors.
Admittedly, the sample does not represent the country’s entire population but only
the “universe of potential investors”. Those below the poverty line or having little
voluntary savings for financial investments or no ability to understand investments,
like shares and bonds, had to be excluded, because they were irrelevant for the
purpose of the present survey.
Sample size and characteristics
The survey covered 100 investors who were interviewed through Questionnaire-.
These, 100 responded was investors of NSE BSE Advisor, banks, India bulls, karvy
securities ltd. the results show a high degree of consistency and comparability.
Investors
India bulls 20
Banks 20
Total 100
• BSE has plans to set up additional Investor Assistance centers in major cities.
The objective behind the setting up of these centers is to provide a local forum
for the redressal of investor grievances and to make available all necessary
data, information and other facilities to the investor at a convenient location in
their respective areas.
Analysis of data:
Q: 1 what is your income
10,001-15000 20 20
15001-20000 18 18
20001-25000 15 15
Over 25000 16 16
Total 100 100
As we know the there are mainly two types of investors, an individual who purchases
small amounts of securities for him/herself, as opposed to an institutional
investor. Also called retail investor or small investor. Entity with large
amounts to invest, such as investment companies, mutual funds, brokerages,
insurance companies, pension funds, investment banks and endowment
funds..
Types of investor
Institutional
Retailer
INTERPRETATION:
The above data shows that 90 retailer investors and 10 institutional investor are
transacting in the market .
Demit account are compulsory for the trading. Without demit account investors are
not able for trading.
INTERPRETATION:
The above data shows that 83% investors are aware about demit account and 17%
investors are not aware about the demit account.
Nature of trading
Option Investors % of
Investors
Long term 10 10
Medium term 30 30
Short term 50 50
Day trader 10 10
Total 100 100
60%
50%
50%
40%
30%
30%
20%
10% 10%
10%
0%
Long term Medium term Short term Day trader
no of investors
INTERPRETATION:
The above data shows that 10% investors are trading in long term, 30% investors are
trading in medium term, 50% investors are trading in short term, 10% investors are
trading in day trader.
Results: Youngsters can invest little more percentage of his savings in risky
equity instruments. The person getting retirement compensation would like to go
for safe, steady instrument, giving regular income, cash inflow.
10%
0%
F a d
n
B
d
n
o
s
n O
tio
s p
E
u
q
ity
tre
u
INTERPRETATION: rsD
tu
n
b
e
The above data shows that 74% investors are investment in the equity, 10% investors
are investment in the bonds, 10% investors are investment in the debentures and 6%
investors are investment in derivatives.
INTERPRETATION:
The above data shows that 5% investors are lost his money in the mutual funds, 45%
investor are lost his in the equity, 15% investors are lost his money in Derivatives
and 35% investors are says that they have no face any problems regarding securities.
S 60.00% 46.00%
R
O 40.00% 32.00%
T 22%
S
E 20.00%
V
IN 0.00%
F
O NSE BSE O th er exch an g e
%
INTERPRETATION:
The above data shows that 46% investors are Listed His Shares in NSE,32% investors
are listed his shares in the BSE, 22% investors are listed his shares in other stock
exchanges.
Q: 9 are you aware about investor grievances cell of NSE, BSE
No of respondents Percent
Yes 55 55
No 15 15
Can Not Say 30 30
Total 100 100
s
r
to 55
s 60
e 50
v 40 30
n
i 30
f 15
o 20
%10
0
Yes No Can Not Say
INTERPRETATION:
The above data shows that 55% investors are know about the investor grievances
fund, 15% investor are lost his in the equity, 30% investors are says that they have no
face any problems regarding securities.
The Government has established an Investor Education and Protection Fund (IEPF) under Sec. 205 C
of the Companies Act, 1956 under which unclaimed funds on account of dividends, matured deposits,
matured debentures, share application money etc. are transferred through the IEPF to the Government
by the company on completion of seven years
0
s
e
v
tr %
fin
o
INTERPRETATION:
The above data shows that 50% investors are know about the investor protection fund,
40% investor are not know about protection funds
No of respondents Percent
Yes 60 60
No 25 25
Can Not Say 15 15
Total 100 100
80 60
60
40 25
15
20
%
0
fin
s
e
v
tr o
INTERPRETATION:
The above data shows that 60% investors are think that grievance mechanism adopted
by stock exchange to resolve their complaints adequate and 25% investors are think
that their complaints are not adequate
INTERPRETATION:
The above data shows that 90% investors are like to attend the seminar but 10 %
investors are not interested to attend the seminars.
Newspapers 14 14
Seminars 18 18
Magazines 15 15
At the stock 22 22
exchange
ALL 29 29
Total 100 100
35
30
25
20
12
15
10
5
0
T.V Newspapers Seminars Magazines stockex All
INTERPRETATION:
The above data shows that 12% investors are prefer the most Tv media, 14% investors
are prefer the most newspapers media, 18% investors are prefer the most seminars
media, 15% investors are prefer the most magazines media, 22% investors are prefer
the most stock exchanges media, 29. % Investors are prefer all the media.
Investors Percent
Important 85 85
Not important 15 15
Can Not Say 0 0
Total 100 100
ROLE OF BROKERS
100 85
80
60
40 15
20 0
0
R
S
E
V
T%
O
IN
F
INTERPRETATION:
The above data shows that 85% investors are think about that role of brokers are very
important for the investor protection but 15% investors are think role of broker are not
important for investor protection.
Increase regulation 18 18
30%
25%
20%
15%
10%
5%
0%
INTERPRETATION:
The above data shows that 27% investors are think about that best solution to protect
investors right are brokers and securities intermediaries should be more honest, 13%
investor are think wrongdoers should be severely and swiftly punished, 18% investors
are think about that increase regulations, 16% of investor are think that improve
management of and internal controls in companies and 26% investors are think about
that educate investors more effectively.
A few limitations and constraints came in way of conducting the present study:-
• Sample size selected may not be the true representative of the entire investors
• This being the first experience of the researcher of the conducting study such
as this, the possibility of better result, using deeper statistical techniques in
analyzing and interpreting data may not be ruled out.
FINDINGS &SUGGESTIONS OF STUDY
Regulators have always talked about investors and made new commitments
every time to protect them, forgetting the earlier ones. Major Banks, intermediaries,
brokers industrialists; business associations, mutual funds and corporate have sung
the same tune.
The Media has always remained helpful towards creating awareness
among the investors. Surprisingly, scams still take place. Investors have either lost
or locked up more than Rs.50000 crore in various scams of the first ten years of
liberalization i.e. 1991-2001. What is missing is the lack of commitment.
From investor protection viewpoint, we need to progress towards a more positive
approach than mere crisis prevention. The aim should be to ensure greater
orderliness in the working of the stock market and to assure all investors at all times
that they shall get a fair deal and shall be protected against malpractice’s
APPENDIX -
INVESTOR COMPLAINT FORMS
(For Matters related to SEBI)
From:
Date:
To
Securities and Exchange Board of India
Investor Grievance and Guidance Division
P.B. No.19972, Nariman Point P.O. Mumbai –400 021
Dear Sir,
Kindly take up the matter with the company for immediate redressal of my
complaint, particulars of which are as under.
1. Name and address of the Investor …………………………………………
5. Type / category
i) Issue / offers -
e) Application deposited at
If yes, date
9. Enclosure, if any
Date:
Note:
It would be advisable to address the complaints to SEBI only if Company /
Registrar has not responded inspite of having sent two reminders over a
period of atleast one month.
COMPLAINT FORM OF COMPNAY LAW BOARD
v. Terms & conditions of deposit and also of maturity of the deposit vi.
Date:
Bank Draft in favour of ‘The Pay & Account Officer, Department of Company
Affairs………..
Date
To,
…………………………………………………………………………
Sir,
Subject …..Complaint in respect of non receipt of …….
7. Bond units
……….. Zone/Br…………………………
9. Confirmation of Nomination
From:
Name …………………………
Date ………………………….
To,
Officer in charge
e-mail : relations@nsdl.co.in
Sir,
With reference to the above, I have to state I haveD’mat A/c with ……………. Br.
Hence, you are requested to look into the matter & give necessary direction to the
Depository Participant.
Thanking you,
(Signature in full)
(Format of filing complaint under)
The State of Maharashtra, has enacted the Investor’s Protection Act in the interest
of small Investor. The investor may refer the provisions therein while filing the
From:
Date:
To,
Maharashtra
I, the undersigned, do hereby submit this complaint for your kind action aginst
aforesaid concern / establishment. The said establishment has failed to pay interest
demand.
The aforesaid establishment has acted in contravention of aforesaid Act and has
committed breach of trust and contract by not honoring the cheques and not paying the
amount agreed.
The particulars of investment and due along with other particulars are given in
schedule I and the particulars regarding company and its directors and
below.
Hence you are requested to register this complaint and attach the properties
Date:
SCHEDULE I
Demand Maturity
1.
2.
3.
4.
5.
SCHEDULE II
(Give detailed information regarding the names and addresses of the directors etc.)
1.
2.
3.
4.
5.
Q: 11 are you satisfied with grievance mechanism adopted by stock exchange to resolve
complaints adequate
A: a) yes b) no c) cannot say
Q:13 which type of media prefer the most for your knowledge
A: a) T.V b) Newspaper c) Seminars
d) At the stock exchange e) All
1. http://www.hinduonnet.com/businessline/iw/2001/06/24/stories/0724g05y.htm
2. Http--www.kiritsomaiya.com-PHDthesis-KIRIT SOMAIYA PH.D. VOLUME ONE.pdf
3. http://www.suchetadalal.com/articles/display/26/466.article
4. http://www.dca.nic.in/report/ar/ar99-2k.htm
5. .http://www.sipc.org/media/release13Dec05.cfm
6. http://www.in.gov/sos/securities/investmentwatch/basic_training.html
7. .http://www.mca.gov.in/MinistryWebsite/dca/report/household/householdm.html
8. .http://pd.cpim.org/2003/0126/12262003_jpc-2.htm
9. http://www.mca.gov.in/MinistryWebsite/dca/investors/iepf.html
10. http://post.economics.harvard.edu/hier/2000papers/HIER1906.pdf
11. .http://econ.worldbank.org/external/default/main?
pagePK=64165259&piPK=64165421&menuPK=64166093&theSitePK=469372&entityID=0000949
46_02041804272577
12. http://jobfunctions.bnet.com/abstract.aspx?promo=50002&docid=167621
13. . http://www.ficci.com/news/viewnew