ABOUT SEBI

Investor Protection Measures by SEBI:

Investors are the pillar of the financial and securities market. They determine the level of
activity in the market. They put the money in funds, stocks, etc. to help grow the market and
thus, the economy. It thus very important to protect the interests of the investors. investor
protection involves various measures established to protect the interests of investors from
malpractices. Securities and Exchange Board of India (SEBI) is responsible for regulations of
the Mutual Funds and safeguard the interests of the investors. Investor protection measures
by SEBI are in place to safeguard the investors from the malpractices in shares, the stock
market, Mutual Fund, etc.

ROLE/CONTRIBUTION OF SEBI IN INVESTOR PROTECTION :

(1) Issue of guidelines: SEBI has issued guidelines to companies (bringing new issues
in the market) mutual funds, portfolio managers, merchant bankers, underwriters,
lead managers, etc. These guidelines are for bringing transparency in their
operations and also for avoiding exploitation of investors by one way or the other.
SEBI has introduced a code of advertisement for public issues for ensuring fair and
truthful disclosures. In order to reduce the cost of issue, the underwriting is made
optional on certain terms. These steps are also for the protection of investors. SEBI
keeps watch on all intermediaries and see that they follow the guidelines in the right
spirit. It also takes panel actions when the guidelines are not followed. These steps
give protection to investors.
(2) Public interest advertisements: SEBI issues public interest advertisements to
enlighten investors on the basic features of various instruments and minimum
precautions they should take before choosing an investment. The SEBI desires to
create an awareness among investors about their rights and about remedies if
problem arise. It has published some booklets for the information and guidance of
investors.
(3) Dealing with complaints of investors: The investors can make complaints to SEBI
if they face problems relating to their investment in industrial securities and financial
assets. SEBI receives thousands of complaints relating to non-receipt of refund
orders, allotment letters, non-receipt of dividend or interest and delays in the transfer
of shares and debentures. SEBI is making efforts to solve such complaints through
appropriate measures.
SEBI is keen to solve the complaints of investors and wants to protect their interests.
It is committed to co-operating with various consumer redressal forum in this regard.
Although, a large number of complaints reaching SEBI are being redressed, still a
large number of complaints remain unredressed.

(4) Investor education: SEBI is aware that investor education is important for his
protection. It encourages the formation of investor associations that disseminate
information through news letters. More than nine such associations are registered
with SEBI. SEBI is bringing out two monthly publications for the investors. These are:
(a),SEBI- Market Review, (b) SEBI News-letter. These publications are for the
education, guidance and protection of investors.
(5) Investor surveys: SEBI has also conducted surveys in respect of investment and
opportunities for the benefit of small investors. The findings of the surveys are given
wide publicity so as to provide proper guidance to investors regarding their
investment decisions.
(6) Introduction to stockinvest: SEBI has introduced stockinvest as a new instrument
useful while submitting application for shares. This new instrument introduced
through the co-operation of banks gives protection to investors as they get interest on
the application money till the allotment of shares. [For details, refer Ch. No. 19]
(7) Disclosures by companies: SEBI has introduced norms for disclosure of half yearly
unaudited results of companies. It has also revised the format of prospectus to
provide more information to investors. It also insists that every share application. form
is accompanied by an abridged prospectus. The provisions relating to disclosures are
for the information and protection of small/average investors.
(8) Code regarding takeovers: SEBI has now issued code regarding takeovers of
companies, mergers and amalgamations. It has introduced regulations governing
substantial acquisition of shares and takeovers and lays down the conditions under
which disclosures and mandatory public offers have to be made to the shareholders.
Here, the purpose is to protect the interests of investors even when they are not
directly party to such takeovers.

Investor Grievances of Redressal:

Securities Exchange Board Of India has taken various measures of regulations in order to
redress the grievances of investors in the stock market. When the investor lodges a complaint
with SEBI it is generally taken up with the respective company, against which the complaint
has been launched, or through intermediary or by continuously monitoring the activities.
When the grievances are lodged against fraudulent stock brokers and depository participants
then specific stock exchanges and depositories are issued notice, who then redress the
grievance and through continuous monitoring with the help of periodic reports. Once the
notice is given to the company and intermediary, they have to respond in a prescribed form of
Action Taken Report (ATR).Once the regulatory body (i.e. the one handling the grievance)
receives the receipt of the ATR, it updates the status of the grievance. If the regulatory body
feels the response given by the company or the intermediary is insufficient or inadequate then
a follow up action is initiated. Appropriate enforcement actions could also be taken by SEBI
as provided under the law if the investor feels that the grievance is not addressed properly.

SEBI guidelines issued with the motive of investor protection:

1. Specify the manner in which the matters relating to issue of capital, transfer of
securities and other matters shall be disclosed by the companies.
2. No company can make an issue of securities unless a draft prospectus has been filed
with SEBI.
 3. The offer document, through which the securities are issued, is to be prepared strictly
as per the requirements of SEBI Guidelines.
4. No company shall make an issue of securities unless it has made an application for
listing of securities at a stock exchange.
5. No company can make public issue unless all existing shares must be fully paid.

Steps taken by SEBI to make investors aware of their rights:

1. Security Market Awareness Campaign(SMAC) was started with a motto “An

educated investor is a Protected investor.”
2. Invest with Knowledge” was the message spread by this campaign.
3. Workshops Advertisements Educative material All India Radio – Information
provided through AIR Programs frequently.

Rights of Investors:

1. To receive the share certificates, on allotment or transfer as the case may be, in due
time.
2. To receive copies of the Director’s report, Balance Sheet and P&L A/c and the
Auditor’s report.
3. To participate and vote in General Meeting either personally or through proxies.
4. To receive dividend in due time once approved in General Meeting.
5. To receive corporate benefits like rights, bonus, etc once approved.
6. To proceed against the company by way of civil or criminal proceedings.

Responsibilities of Investors:

1. To remain informed.
2. To be vigilant.
3. To participate and vote in general meetings.
4. To exercise his rights on his own or as a group.