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Investor Protection Measures by 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.
(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.
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.
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.
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.