aditi updated

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A

Project Report

ON

Investors Protection in India

Submitted in partial fulfillment of the Requirement

for award of the Degree of Master of Business

Administration (MBA)

March, 2011

Under the supervision of SUBMITTED BYMrs. ANAND GUPTA ADITYGUPTA

Lecturer in K.A.I.M. MBA 4th Semester

Roll No. 9002

KEDARNATH AGGARWAL INSTITUTE OF

MANAGEMENT, CHARKHI DADRI

(Affiliated to Maharishi Dayanand University, Rohtak)


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PREFACE

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.

I have done my project on Investor protection in India

(ADITY GUPTA)


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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)


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Contents1. Significance of the study

2. Review of existing literature

3. Conceptualization

Industry profile

Company profile

Introduction of the topic

4. Focus of the problem

5. Objective of the study

6. Research methodology

Research design

Sample design

Collection of data

Analysis of data

7. Limitations of the study

8. Organization of study

9. Suggestion and conclusion

10. References


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IntroductionInvestor 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. Onewho 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;


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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 corporatesector 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 ofsecurities for

him/herself, as opposed to an institutional investor. Also called retail investor or smallinvestor.

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
http://www.investorwords.com/4446/securities.htmlhttp://www.investorwords.com/2504/institutional_investor.htmlhttp://www.investorwords.com/2609/investment_companies.htmlhttp://www.investorwords.com/3173/mutual_funds.htmlhttp://www.investorwords.com/585/brokerages.htmlhttp://www.investorwords.com/2510/insurance.htmlhttp://www.investorwords.com/3652/pension_funds.htmlhttp://www.investorwords.com/2602/investment_banks.htmlhttp://www.investorwords.com/1707/endowment.htmlhttp://www.investorwords.com/5258/volume.htmlhttp://www.investorwords.com/4446/securities.htmlhttp://www.investorwords.com/2504/institutional_investor.htmlhttp://www.investorwords.com/2609/investment_companies.htmlhttp://www.investorwords.com/3173/mutual_funds.htmlhttp://www.investorwords.com/585/brokerages.htmlhttp://www.investorwords.com/2510/insurance.htmlhttp://www.investorwords.com/3652/pension_funds.htmlhttp://www.investorwords.com/2602/investment_banks.htmlhttp://www.investorwords.com/1707/endowment.htmlhttp://www.investorwords.com/5258/volume.html


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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%.

5) Corporate and Institutional Investors:

Corporate Strategic Investors (e.g. major firms looking for partnerships).

Institutional investors include subsidiaries of commercial banks, investment banks, life

insurance companies and pension funds. Canada has a wide range of such organizations

including Bank of Montreal Capital, Royal Bank Capital Corporation, CIBC Wood Gundy

Capital, Penfund Partners, Investissement Desjardins, Roynat, Ontario Teachers' Pension

Fund, OMERS and TD Capital. Institutional investors provide equity and subordinated debt

financing to small and medium-sized businesses. These organizations fund investments that

are less than $1 million, as well as larger ones.
http://strategis.ic.gc.ca/sc_mangb/stepstogrowth/engdoc/step6/#corporatehttp://strategis.ic.gc.ca/sc_mangb/stepstogrowth/engdoc/step6/#corporate


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6) Government-Backed Corporations: Government-backed corporations, such as the

Community Futures Development Corporations, often provide equity financing in

small communities where there are few mainstream investors. The Atlantic Canada

Opportunities Agency supports businesses in the Atlantic Provinces. The Business

Development Bank of Canada (BDC), on the other hand, operates across Canada;

BDC provides not only financing but also counseling, training and mentoring

assistance.

7) Corporate Strategic Investors: Corporate strategic investors provide equity to small

and medium-sized businesses. They differ from traditional venture capital firms in that

their motivation extends beyond immediate financial reasons. Their business

agreements are also referred to as "strategic alliances" or "corporate partnerships."

Strategic investors have a wide range of objectives: to enhance innovation, to gain

exposure to new markets and technologies, to find acquisition candidates, to assure

sources of supply, to help a client, to initiate new ventures internally, and to spin off

businesses that aren't appropriate for in-house purposes.

8) Conservative investor: Their major goal is to preserve their capital. They want to earn

some income but because their timeframe to invest is short (2 years), they want to take

few risks. Their portfolio is likely to be made up of cash and fixed interest investments

with no investments in shares and property. The biggest risk they face is that their

investments may not keep pace with inflation.

9) Moderate investor: They want to benefit from holding some growth investments but will

only accept an outside chance that their capital could reduce in the short-term. Their

investment timeframe is under 5 years. Their portfolio may have 35-40% invested in

property and shares.

10) Moderately aggressive investor: They are investing for a longer-term (5-10 years) andwant to spread their investments over all the asset classes. They want both income and

growth and accept that there may be periods where their portfolio goes backwards.

In the longer-term they expect to do better than Moderate investors. Their portfolio

may have 70-75% invested in property and shares.


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11) Aggressive investor: They want to focus almost entirely on growth assets and all of

their investments will be in shares and property. They accept that in the short-term

their portfolio may do worse than cash returns and the capital they have invested may

reduce. However, as long-term investors (10 years and longer) they are confident that

shares and property will outperform all other asset classes.

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 investors 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 investors protections.

Three things need to be done to enhance the investors 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


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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 investors

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


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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.

Rights of a shareholder as an investor:

As a shareholder in a company, one enjoys certain rights, which are as follows:


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o To receive share certificates, on allotment or transfer as the case may be, in

due time.

o To receive copies of the abridged annual report, the balance sheet, the profit

&loss account and auditors reports.

o To receive dividends in due time once they are approved in general meetings.

o To get corporate benefits such as rights and bonus share, once they are

approved

o To apply to the company law board to call or direct the annual general

meeting.

o To inspect the minutes book of the general meetings receive copies thereof

o To proceed against the company and

o To receive the residual proceeds.

A debentures holder has the following rights:

o To receive interest/redemption in due time

o To receive a copy of the trust deed on request.

o

To apply for winding up of a company, if it fails to pay its dept.o To approach the debenture trustee with any grievances.13

Investors 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.

Safeguard for investors:


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These are some of the safeguards that need to adhere to by the investors before trading in

the securities market.

o While selecting the broker /sub broker

Deal with only sebi resisted broker /sub-broker after due diligence. Details of list of

brokers can be procured from the member list published by the exchange and from

the web site www.bseindia.com&wwwnseindia.com

o Enter into an agreement

1. Fill in a client registration from with broker/sub broker

2. Enter into broker/sub /broker client agreement. This agreement is mandatory

from all the investors for registering as a client of a BSE trading member.

The client should ensure the following before entering into an agreement:

1. Carefully read to understand the terms and conditions of the agreement, before

executing the same on a valid stamp paper of the requisite value.

2. Agreement has to be signed on all the pages by the clients and the member or

theyre repressive who has the authority to sign the agreement. Agreement has to

be signed by the witnesses by giving their names and addresses.

o While transacting

1. Specify to the broker/sub broker, the exchange through which your trade is to

be executed and maintained separate account per exchange.

2. Obtain a valid contract note (from broker)/confirmation memo (from sub

broker) within 24 hours of the execution of the trade. Contract note is a

confirmation of trade done on a particular day for and on behalf of a client in a

format prescribed by the exchange. It establishes a legally enforceable

relationship between the member and client in respect of settlement of trades

executed on the exchange as stated in the contract note.

Contract note are made in duplicate, and the member and clients both keep one

copy each. The client/s are expected to sign on the duplicate copy of the note

For having received the original.

1. Contract note form A contract note issued where member is acting for constituents as

brokers and agents

2. Contract note form B contract note issued by members dealing with constituents as

principles


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3. Contract note form C confirmation memo issued by registered sub brokers acting for

clients/constituents as sub brokers

Ensure that the contract note/confirmation memo contains:

1. Sebi registration number of the member /sub broker:

2. Details of trade such as order no., trade no., trade time quantity, price brokerage,

settlement number, and details of other levies

3. The trade price should be shown separately from the brokerage charged. The

maximum brokerage that can be charged is Rs 0.25 per share/debenture or 2.5% of

the contract price share /debenture whichever is higher. This maximum brokerage is

inclusive of the brokerage charged by the sub broker (sub-brokerage cannot exceed

1.5% of the trade value) .any additional charges that the member can charge are

service tax @12.5 % as may be applicable) of the brokerage, stamp duty, etc.

4. The brokerage and service tax are required to be indicated separately in the contract

note.

5. Signature of authorized representative

6. Arbitration clause stating that the trade subject to the jurisdiction of Mumbai must be

present on the face of the contract note.16

Ensuring settlement

Ensure delivery of securities/payment of money to the broker immediately upon getting

the contract note for sale /purchase but in any case, before the prescribed pay in day.

The member should pay the money or securities to the investor within 24 hours of the

payout.

Open Demat account.

For delivery of shares from Demat a/c, give the depository participant (DP)delivery out

instructions to transfer the same from the beneficiary account to pool account of broker

through whom shares and securities have been sold.

The following details to be given to the DP:

Details of the pool a/c of whom the shares are to be transfer, details of script, quantity etc. as

per the requirement of depositories, the delivery out instruction should be given at least 48

hours prior to the cut off time for the prescribed securities pay in.


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1. For receiving shares in your Demat a/c, give the depositary participant delivery in

instruction to accept shares in beneficiary accounts from the pool account of broker

through whom shares have been purchased.

2. If physical deliveries are received check the deliveries as per good/bad delivery

guidelines issued by SEBI.

3. Bad delivery cases should be sorted out through exchange machinery immediately

4. The investor should tally the account with the member at least once in 6 months.

5. The investor may verify their trades done on BSE through trade confirmation system at

www.bseindia.com if they have a contract note for the concerned trade.

6. All registration of shares for ownership of physical shares should be executed by a valid,

duly completed and stamped transfer deed.17

INVESTOR RIGHTS AND OBLIGATIONS

Investor Rights Investor Obligations

The right to get

The best price

Proof of price/brokerage charged

Your money/shares on time

Shares through auction wheredelivery is not received

Square up amount where deliverynot received in auction

Statement of Accounts from trading

member

The obligation to

Sign a proper Member-ConstituentAgreement

Possess a valid contract or

purchase/sale note Deliver securities with valid

documents and proper signatures

The right for redressal against

Fraudulent price

Unfair brokerage

Delays in receipt of money orshares

Investor unfriendly companies

The obligation to ensure

To make payment on time

To Deliver shares on time

To send securities for transfer to thecompany on time

Forwarding all the papers receivedfrom the company under objectionsto the broker on time

Several avenues are available for investment. Dont put all your eggs in the

same basket. One has to choose different instruments as per his requirements, savings,
http://www.bseindia.com/http://www.nseindia.com/content/assist/asst_statement.htmhttp://www.nseindia.com/content/assist/asst_statement.htmhttp://www.bseindia.com/http://www.nseindia.com/content/assist/asst_statement.htmhttp://www.nseindia.com/content/assist/asst_statement.htm


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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.


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WHERE TO INVEST?

IMPORTANT FINANCIAL RATIOS:

Investors must understand various ratios, phrases used in Capital Market. To

understand the intrinsic value of the Company, it helps a lot. All business newspapers,

business magazines, give detail about Stock Market Ratios of each Company.

At the time of making decision about investment one must study, understand, these

ratios. Compare the ratios of that particular company with the industry, the

background of the company etc. An informed, studied investment is safe investment.

Prevention is best way of protection.

Financial Ratios

1.Book value per share = equity share capital + reserves

Total no. of equity shares

2.Cash Earning per share


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= Net Profit Preference Dividend +Deprecation

No of Equity Shares

= Gross Profit-Tax

No of Equity Shares

3.Cash P/E = Days Closing Price

Cash Earning Per Share

4.COVER = Earning Per Shares (Eps)

Dividends Per Share

5.Current Ratio (%) = Total Current Assets*100

Total Current Liabilities

6.Earning Per Share (Eps) = Profit After Tax (Pat)-Preference Dividend

Total No. Of Equity Shares

7.Earnings Price Ratio (%)Or Earnings Yield =Earnings Per Share*100

Market Price Of the Share

8.Earnings To Equity (%)= Profit After Tax (PAT)-Preference Dividends

Equity Share Capital + Reserves

9.Pay Out Ratio= Dividend Per Share *100Earnings Per Share

10.P/B V Ratio= Market Price Of Share

Book Value Of Share

11.P/E Ratio= Market Price Of The Share

Earning Per Share (Eps)


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12. Pbt To Sales = Profit Before Tax (Pbt) 100

Net Sales

13.Quick Ratio= Current Assets-Inventories

Current Liabilities

STATUS OF INVESTORS GRIEVANCES/REDRESSAL SYSTEM

Process of solving investors grievances

BSE has established a full-fledged Investors Services Cell (ISC) to redress Investors

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:

Investors grievances against Listed Companies:

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

Investors 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 transfers such Scrips to Z category for non-resolution of Investor

Complaints.

ISC takes many other pro-active measures to resolve the Investors grievance such as:

Calling the Company representative to the Exchange to interact with Investors / Members

to resolve the complaints.

Calling major Registrar & Transfer agent to the Exchange to interact and resolve the

grievances of the Investors and Members of the Exchange.


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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.

Investors grievances against Members

The nature of complaints received by the Exchange can be broadly classified into the

following categories:

Non-receipt of delivery of shares/ Non removal of objection/Non-receipt of sale

proceeds of shares/ Non-receipt of dividend/ Non-receipt of Rights, Bonus shares

Disputes regarding Rate Difference

Disputes relating to non-settlement of Accounts

Miscellaneous Items

The complaints are forwarded to the concerned members to reply /settle the complaints

within 7days from the receipt of the letter. If no reply is received or reply received is not

satisfactory, the matter is placed before the IGRC (Investors Grievance Redressal

Committee) headed by Retd. High court Judge. IGRC is constituted by the Governing

Board to resolve the Complaints of non-members against Members through the process of

reconciliation. The parties are heard and the matter is tried to be solved amicably or it is

referred for Arbitration under the Rules, Bye-laws & Regulations of the Exchange.

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


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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.

Arbitration Procedure against Defaulter Member of the Exchange

Any complaint against defaulter Members of the Exchange can directly be filed in

arbitration. However the same has to be filed within 6 months from the date of declaring

the Member as defaulter by the Exchange. The rest of the process is the same as above.

An award obtained against a defaulter member is scrutinized by the Defaulters committee

(DC), a standing committee constituted by the Exchange, to ascertain their genuineness,

etc. The awarded amount or Rs.10 lakh whichever is lower is paid from the Customers


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Protection Fund (CPF). After the approval of the DC & Trustee of CPF, the amount is

distributed to the clients who have obtained the award against defaulter member.


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Status Report Of Arbitration Matter

Investors or Customers Protection Fund

BSE is the first Exchange to have set up the 'Stock Exchange Customers Protection Fund

in the interest of the customer's of the defaulter members of the Exchange. This fund was

set up on 10th July 1986 and has been registered with the Charity Commissioner,

Government of Maharashtra as a Charitable Fund. BSE is the only Exchange in India,

which offers the highest compensation of Rs.10 lakhs in respect of the approved claims of

any Investor against the defaulter members of the Exchange.

The members at present contribute Rs.1.50 per Rs.10 lakhs of turnover. The Stock

Exchange contributes 2.5% of the listing fees collected by it. Also the entire interest

earned by the Exchange on 1% security deposit kept by with it by the companies making

public / rights issues is credited to the Fund.30

Trade Guarantee Fund

In order to introduce a system of guaranteeing settlement of trades and ensure that market

equilibrium is maintained in case of payment default by the Members the Trade Guarantee

Fund was constituted and it came into force with effect from May 12, 1997. The main

objectives of the fund are as given below:


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1. To guarantee settlement of bonafide transactions of members of the Exchange inter

se which form part of the Stock Exchange settlement system, so as to ensure timely

completion of settlements of contracts and thereby protect the interest of Investors

and the Members of the Exchange.

2. To inculcate confidence in the minds of secondary market participants generally

and global Investors, particularly to attract larger number of domestic and

international players in the capital market.

3. To protect the interest of Investors and to promote the development of and

regulation of the secondary market.

The Defaulters Committee manages the Fund, which is a standing Committee constituted

by the Exchange, the constitution of which is approved by SEBI.

Investor Awareness & Education programme

Investor Awareness programs are being regularly conducted by BSE to educate the

investors and to create awareness among the Investors regarding the working of the capital

market and in particular the working of the Stock Exchanges. These programs have been

conducted in Gujarat, Kerela, Tamilnadu, Uttar Pradesh, Rajasthan, Punjab, and Haryana

and within Maharashtra.

The Investor Awareness program covers extensive topics like Instruments of Investment,

Portfolio approach, Mutual funds, Tax provisions, Trading, Clearing and Settlement,

Rolling Settlement, Investors' Protection Fund, Trade Guarantee Fund, Dematerialization

of shares, information on Debt Market, Investors Grievance Redressal system available

with SEBI, BSE & Company Law Board, information on Sensex and other Indices,

workshops and Information on Derivatives, Futures and Options etc.

The Bombay Stock Exchange has also earmarked an amount of Rs.1 crore for assistance

to Investor Associations for conducting Investor Awareness and education seminars etc.

During the year 2000 2001 an amount of Rs.20 lakhs has been disbursed to the SEBI

recognized Investors Association.

The Indian governmental authorities have recognized this problem by creating a special

fund, known as Investor Education and Protection Fund (IEPF) in the Department (now

Ministry) of Company Affairs. It is a laudable idea. In addition, the SEBI has also

launched its Investor Awareness Programme.All these attempts are rather sporadic and do


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not seem to have made much impact so far. A more systematic approach to investor

education is needed.

The fast socio-economic changes in India, as in other countries, are increasingly forcing

people to provide for their own retirement during their working life.

Further, for the benefit of the Investors the Bombay Stock Exchange has:

1.BSE Training Institute which organizes Investor Education programs periodically on

various subjects like comprehensive program on Capital Markets, Fundamental Analysis,

Technical Analysis, Derivatives, Index Futures and Options, Debt Market etc. Further, for

the Derivatives market BSE also conducts the compulsory BCDE certification for

members and their dealers to impart basic minimum knowledge of the derivatives markets.For any enquiries Contact: The Training Institute, 21st Floor, P.J.Tower, Dalal Street,

Mumbai- 400 001.

2.BSE's official Website www.bseindia.com which is the focal point for information

dissemination and updates Investors with the latest information on Stock Markets on a

daily basis through real time updating of statistical data on Market activity, corporate

information and results. Educative articles on various products and processes are also

available on the site.

Publications: BSE regularly comes out with publications for Investor education on

various products and processes like Quick reference guide for Investors.

Introduction And Information About Regulatory System

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.


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New regulators are entering in the arena. IRDA already established. New regulators for

Pension Funds, Commodity exchanges are being mooted. Pension Fund Ordinance

issued on 30

th

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 CapitalMarket. 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

presented to the Lok Sabha on 10th

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, &


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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 SmallInvestors and also to come out with a time-bound action plan.


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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.

STATUS OF INVESTOR GRIEVANCES

FOR THE FORTNIGHT APRIL 1 TO APRIL 15, 2005

The grievance letters received by SEBI from investors have been categorised as under:

Type I: Non-receipt of refund orders/allotment letters etc.

Type II: Non-receipt of dividend.

Type III: Non-receipt of share certificates/bonus shares.

Type IV: Non-receipt of debenture certificates/interest on debentures/redemption

amount of debentures/interest on delayed payment of interest on debentures/redemption

amount of debentures.

Type V: Non-receipt of right forms/interest on delayed receipt of refund order.

BREAK-UP OF GRIEVANCES RECEIVED AND REDRESSED DURING THEFORTNIGHT:


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During the fortnight, SEBI received 1698 grievances against listed companies. In the

same period 2948 grievances were reported redressed. These redressed grievances

include grievances brought forward from the previous periods.

TYPE GRIEVANCES RECEIVED DURING

THIS FORTNIGHT

GRIEVANCES REDRESSED

DURING THIS FORTNIGHT

I 424 258

II 180 180

III 455 242

IV 251 2241

V 388 27

TOTAL 1698 2948

GRIEVANCES HANDLED BY SEBI

Small Investors are required to send their complaints, grievances to the

particular Regulator. SEBI has power to handle following types of grievances

TYPE / CATEGORY

i) Issue / offers -

1. Refund Order / Allotment advice

2. Revalidation of refund order

3. Duplicate R/O for correct amount

4. Duplicate R/O for identity

5. Cancelled Stock Invest (S.T.)

6. R/O after details furnished

7. Copy of encashed RO

8. Duplicate RO for correct details

9. Allotment against encashed SI.

10. Duplicate RO. after correction

11. Short refund

II) NON-RECEIPT OF DIVIDENDIII) SHARES: NON-RECEIPT OF CERTIFICATE IN/ AFTER

1. Exchange of allotment Letter

2. Conversion

3. Splitting

4. Transfer

5. Endorsement

6. Bonus Transmission

7. Consolidation


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8. Duplication on submission of Indemnity Bond

iv) MISCELLANEOUS : NON-RECEIPT OF

o Annual Report

o Offer of Rights

o Interest on delayed Refund Payment

o Registration of change dividend

o Interest on delayed dividend

o Non list of securities on stock exchange

o Any other

REDRESSAL OF INVESTOR GRIEVANCES:

(I) SECURITIES EXCHANGE BOARD OF INDIA

SEBI has established a comprehensive investor grievances redressal mechanism. The

Investor Grievances Redressal and Guidance Division of SEBI assists investors

who prefer to make complaints to SEBI against listed companies. Each

complaint received by SEBI from the investors is acknowledged and a

reference number is sent to the complainant. Each complaint is taken up with the

company and if the complaint is not resolved within a reasonable time, a periodical

follow up is also made with the company. SEBI officers also hold meetings

with the company officials to impress upon them their obligation to redress

the grievances of investors.Errant companies are warned of stern action for theirfailure to redress grievances. Recalcitrant companies are referred for prosecution.

SEBI in its annual report 2004-05 has presented the cumulative status of

investors grievances received by SEBI, those resolved by companies and the

redressal rate in this regard during the last ten years as reproduced below:


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Redressal Of Investor Grievances

It may be observed from above that redressal rate of grievances is over

90% during the last four years. SEBI has, however, not disclosed the age-wise

pendency of complaints.

In order to ascertain correct status of redressal of grievances where companies did

not report back, SEBI has been conducting an exercise of sending reply paid post

cards to investors requesting them to reply as to whether their complaint has been

resolved by companies or not. Year wise data in this regard have been

compiled from three annual reports of SEBI pertaining to the year 1998-99 to 2000-

01. Post cards are sent only to those investors by SEBI where the complaints are

shown as pending in records of SEBI i.e. where the companies have not reported

redressal of those cases, when SEBI wrote to investors by sending post cards, they

reported redressal of their

Complaints.

The data regarding age-wise pendency of complaints would give an indication

of the effectiveness of grievances redressal machinery. This information is,

however, not available in the SEBIs Annual Report.


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(II) DEPARTMENT OF COMPANY AFFAIRS

The Department of Company Affairs has also set up an Investors Protection Cell,

Investor Complaints received in this Cell are processed for action by referring

them to the concerned companies for speedy redressal. An acknowledgment is

issued and subsequently, action taken as informed by the company is also

communicated to the complainant. The Department has reportedly processed

7834 complaints during the period from 1.4.2000 to 31.12.2000 out of

which, 7343 complaints were satisfactorily redressed. During the period 1.4.2000

to 31.12.2000, prosecution against 90 companies were ordered by Investors

Protection Cell.

(III) STOCK EXCHANGES

The data regarding receipt and disposal of investor grievances in respect of years as

presented by BSE and as observed from the fact book of NSE are shown below

Bombay Stock Exchange Ltd. resolved 1060 Investors complaints against

companies during the month of JANUARY 2007.

During the month, BSE Ltd. received 560 complaints against 359 listed companies. In

the same period 1060 complaints were resolved against 533 listed companies. Theseresolved complaints include complaints brought forward from the previous periods.

TYPE OF COMPLAINTS COMPLAINTS RECEIVED COMPLAINTS RESOLVED

Active Suspended Total Active Suspended Total

I 60 0 60 50 1 51

II 97 0 97 86 9 95

III 141 1 142 122 94 216

IV 105 79 184 197 433 630

V 77 0 77 66 2 68

TOTAL 480 80 560 521 539 1060

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


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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 ofrefund order/dividend, etc.

Type V: Non-receipt of credit with Depository Participants.

Survey of literatureVarious 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 ofIndian Investors conducted by Securities and Exchange Board of India

(SEBI) & National Council ofApplied Economic Research (NCAER)

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


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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.Toovercome 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

submitted its report on 17th

April, 2001. In its report the Committee felt need for a

separate Act for Investor Protection.


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Dr. N.L. Mitra report has observed that the provision regarding protection

of investors 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


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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 dont 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


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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 couldnt 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

promoterBharatiya 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.


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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

appropriateadministrative 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.


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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 losetheir 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 consideringinvesting 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 riskierthis 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.

JPC Report On Serious Flaw In The Report

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 thecost of the small investors, this Committee were severely handicapped in the matter of


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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.

The Committee shall recommend the following activities relating to investors?

Education, awareness and protection:

(a) Education Programme through Media;

(b) Organizing Seminars and Symposia;

(c) Proposals for registration of Voluntary Associations or Institution or other

Organizations engaged in Investor Education and Protection activities;

(d) Proposals for projects for Investors? Education and Protection including

research activities and proposals for financing such projects;

(e) Coordinating with institutions engaged in Investor Education, awareness


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and protection activities; The Committee may also be entrusted with such

other functions for carrying out the objects for which the Fund has been

established.

Investor Protection and Equity Markets by Andrei Shleifer and Daniel

Wolfenson

In this research a simple model of an entrepreneur going public in an environment

with poor legal protection of outside shareholders. The model incorporates elements

of Beckers (1968) crime and punishment framework into a corporate finance

environment of Jensen and Meckling (1976). He examines the entrepreneurs decision

and the market equilibrium. The model is consistent with a number of empirical

regularities concerning the relationship between investor protection and corporate

finance.

Recent research reveals that a number of important differences of financial systems

among countries are shaped by the extent of legal protection of outside investors from

expropriation by the controlling shareholders or managers.

Corporate Governance, Investor Protection, and Performance

In Emerging Markets by Leora F. Klapper

Recent research studying the link between law, and finance has concentrated oncountry-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 provisionsmatter 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.


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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.

Modern tech should aid in protecting investors by FICCI

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.
http://jobfunctions.bnet.com/search.aspx?compid=5589http://jobfunctions.bnet.com/search.aspx?compid=5589http://jobfunctions.bnet.com/search.aspx?compid=5589


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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

NEED OF THE STUDY

Investors are backbone of the capital market. Mobilizing savings from the small

investors, channelizing the same into the capital market and making it

available for industrial development can help to have better economic

growth. Developed countries of the world have used this route for achieving the

economic growth.

India being a developing country accepted this route. Importance to the small

investors got momentum after the economic liberalization of 1991.Though

the market capitalization in the capital market went up from Rs.54, 000 Crores in

1990 to almost Rs.15, 00, 000 Crores in 21st

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.


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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

RESEARCH DESIGN OF THE STUDYThis research work is based on various data, charts, tablets, and survey. Primary

and secondary data have been collected from various sources.

Primary data was collected through sample survey. A questionnaire containing

various aspects of savings, attitude, income level, habits of investors were covered.

This data belongs to NCR.

Investment in small savings, fixed deposits, debentures, company deposits, bank

deposits, equity share application, equity share purchase from secondary market i.e.

from stock exchange, investment in Mutual Funds are covered.

The depth of investors education, awareness among them, importance and status.

Help and support for filling the questionnaire, guidance from experts being

obtained.

The present study is descriptive & ex plo ra tr ar y study based on various data,

opinion, collected, gathered from various books published on capital market, debates

of parliament, annual reports-journals, publications of RBI, SEBI, Government

Agencies, business magazines, business newspapers and others.

Primary data have been collected through the field survey conducted in

NCR. The data about grievances of small investors were collected from the Investor

Grievances Forum.

Views of experts, authorities have been gathered, collected, noted through the

personal interaction and interviews taken during the last quarter of 2011.


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SCOPE OF THE STUDY

The importance of Investors has been recognized in the development of the country.

India being a developing country, expansion, growth of Capital Market is fast.

Savings rate of 22% in India demands study of investment pattern, structure

and experience.

The scheme pertaining to Capital Market, secondary market, primary market,

plantation companies, Non Banking Finance Companies, fly-by-

night companies, vanishing companies, Eke ka Double Debt Fund Schemes.

The study is confined to Investors, their habit, their experience about Grievances

Redressed System, necessity of the same. Though figures, data covering whole of

India is covered as per availability of data /information. The survey concentrated

mainly on Ludhiana in Punjab state of India.

Presently, Investor is worried about Grievances Redressed System, demands

protective measures, accountability from Regulators, more transparency and

speedy justice. Positive atmosphere attracts more small savings in the Capital

Market and finance market, which positively pushes industrial development,

i.e. economic growth of the country.

DATA COLLECTION

Sampling procedure:

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 countrys 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.


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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

NSE BSE Advisor 40

Karvy securities ltd 20

India bulls 20

Banks 20

Total 100

Limitation of the study

Although the survey has been conducted very carefully but some points remain inevery survey. It is also happen with me. These points remain due to some reasons,

that reasons are as fellow:

Most of investors are filled the questionnaire very quickly.

Some of investors are refuse to participate in the survey.

Most of the investors are conservative and precise in their replies.

Future scope of study

The Capital Markets in India have seen a period of unparalleled growth in the last two

decades of the twentieth century. The Indian Capital Markets, at the dawn of the new

millennium, face a number of challenges, which would prove critical for its future

development and growth. Investor Education and Training is one of the most critical

areas, which demand greater attention and response from all the major participants in

the capital market.


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BSE has been in the forefront of providing Investor education and training to the vast

Investor populace in India as also enhancing the safety and security features in the

capital market mechanism so as to ensure the highest level of Investor protection.

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.

BSEs collaboration with ZEE Interactive Learning Systems is a very

important step in this direction. BSE and ZEE would work together to provide

knowledge, information and awareness through structured training on various

aspects of the capital markets to the common investor. The collaboration

would be initiated with a pilot series of 26 episodes, which will be aired 3

times a week .The timing of the telecast, would be based on the target segment

and would be decided by mutual consultations between BSE and ZEE. The

television series would be tentatively called "BSE Investor Awareness

Program". BSE would retain the naming rights to the program.


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Analysis & interpretation

Analysis of data:

Q: 1 what is your income

Total no. of investors income wise :

Monthly Inco

me (Rs.)

No. of

respondents

% of

respondents

31

20

18

15

16

100

Upto 10000 31

10,001-15000 20

15001-20000 18

20001-25000 15

Over 25000 16

Total 100

Q: 2 what is your age

Total no. of investors age wise

Age Groups

(Years)

No. Of

Respondents

%

Of Respondents

Upto 25 5 5

26-30 7 7

31-40 35 35

41-50 23 23

51-60 20 20

61-65 5 5

66-70 3 3

71 and above 2 2

Total 100 100

aditi updated

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