“COMPARATIVE ANALYSIS OF INVESTOR PROTECTION LAWS ACROSS COUNTRIES”

A
SUMMER INTERNSHIP PROJECT REPORT
SUBMITTED IN THE PARTIAL FULFILMENT
OF THE REQUIREMENTS OF ARKA
JAIN UNIVERSITY

For the award of the degree of

BACHELOR OF COMMERCE (HONORS)
For the session 2021-2024

Submitted By
Name: VINEET SHARMA
University Enrolment Number: AJU/211421

Faculty Mentor
Name: Prof. Seema Das
Designation: Assistant Professor

School of Commerce and Management, ARKA JAIN UNIVERSITY

 DECLARATION BY THE STUDENT

I, VINEET SHARMA, hereby declare the project titled “COMPARATIVE ANALYSIS OF

INVESTOR PROTECTION LAWS ACROSS COUNTRIES”, has been carried out by me
during my ‘SUMMER INTERNSHIP PROJECT REPORT’ and is hereby submitted in the
partial fulfilment of the requirement of ARKA JAIN UNIVERSITY for the award of the
degree of Bachelor of Commerce.

To the best of my knowledge, the project undertaken, has been carried out by me and is my
original work. The contents of this report are authentic, and this report has been submitted to
ARKA JAIN UNIVERSITY and it has not been submitted elsewhere for the award of any
Certificate/ Degree/ Diploma etc.

Signature of the Student Name of the Student: VINEET SHARMA

University Enrolment No.: AJU/211421 B.COM (H) (2021- 2024)
 CERTIFICATE OF APPROVAL

This Dissertation Report of “VINEET SHARMA” titled “COMPARATIVE ANALYSIS

OF INVESTOR PROTECTION LAWS ACROSS COUNTRIES” is approved in quality
and form and has been found to be fit for the Partial Fulfilment of the requirements of
ARKA JAIN UNIVERSITY for the award of the degree of Bachelor of Commerce.

Approval of the Program Coordinator Approval of the Assistant

Dean (UG) Department of B. Com (H) School of Commerce and
Management School of Commerce and Management ARKA JAIN UNIVERSITY
ARKA JAIN UNIVERSITY

APPROVAL OF THE EXAMINER

 CERTIFICATE FROM THE FACULTY MENTOR

This is to certify that VINEET SHARMA, of ARKA JAIN UNIVERSITY,

AJU/211421, a student of B.Com (H) (2021-2024), has undertaken
Dissertation Report Title “COMPARATIVE ANALYSIS OF INVESTOR
PROTECTION LAWS ACROSS COUNTRIES” for the partial fulfilment
of the requirement of ARKA JAIN UNIVERSITY for the award of the
degree of Bachelor of Commerce, under my supervision.

Signature of the Faculty Mentor,

Name of the Faculty Mentor: Prof. Seema Das
Designation of the Faculty Mentor: Assistant Professor
 ACKNOWLEDGEMENT

I take this opportunity to thank my faculty mentor Prof. Seema Das,

SCHOOL OF COMMERCE AND MANAGEMENT, ARKA JAIN
UNIVERSITY, for her valuable guidance, closely supervising this work over with helpful
suggestions, which helped me to complete the report properly and present.
More importantly, her valuable advice and support helped me to put some creative efforts on
my project. She has really been an inspiration and driving force for me has constantly
enriched my row ideas with his vast experience and knowledge.

Specially, I would also like to give my special thanks to my parents whose blessings and love
enabled me to complete this work properly as well.

Name of the Student: VINEET SHARMA

University Enrolment No.: AJU/211421
B. Com (2021-2024)
 INDEX

CHAPTER CHAPTER NAME PAGE NO.

NO.
Executive Summary
Introduction to the Topic 1-5
Chapter 1
Chapter 2 Review of Literature and 6-9
Research Gap
Chapter 3 Project Objectives 10-14
Chapter 4 Research Methodology 15-16
Chapter 5 Data Analysis and Interpretation 17-19
Chapter 6 Findings 20
Chapter 7 Suggestions or 21-22
Recommendations
Chapter 8 Conclusion 23
References 24-25
 EXECUTIVE SUMMARY

Investor protection is one of the most important elements of a thriving securities market or
other financial investment institution. Investor protection focuses on making sure that
investors are fully informed about their purchases, transactions, affairs of the company that
they have invested in and the like. The Law created by the government and various
authorities should not only be sufficient but should also be implemented in an effective way.
The echo of investor protection is about the amount of informed knowledge the investor is
getting before doing any kind of investment.
Investor confidence is the requirement of the vibrant capital market. And this confidence of
the investor is created by an efficient regulator of the capital market. A wealthy investor
should take the right choice in the securities market for which there will be sufficient capital
formation in the economy. So, the role of the regulation’s education and awareness in the
market.
Though both countries like India and the United Kingdom’s differs from many aspects, India
has adopted many laws of the United Kingdom and implemented for the upliftment of the
country. The article first describes the historical background of laws resalting to investors
protection in the financial market of India and the United Kingdoms. It also describes the
current regulator and what step are being taken to protect the interest of investor by both
countries. The comparison also describes the grievance cell for the investor and the
awareness they created about the investment they do in the financial market. If an investor is
aware of its risk, rule and regulation in the country it can be well protected. The comparison
also identifies the significance of Investor awareness and education towards the risk of
investment they are making in the securities market.
 CHAPTER – 1 INTRODUCTION OF THE TOPIC
1.1 Introduction

An investor is anyone who invest money in business entity with the aim of gaining return.
Investing is securities market serves the purpose of both the investor as well as the
business entity. The investor gets the opportunity to earn while the business entity gets the
capital it requires to run the business. Investors play a very crucial role in the growth of
economy of a country. They help a company to grow and succeed which in turn affect the
economy. The investments are the sole differentiate between developed, developing and
under -developed economics. Thus, investors are very important, and it is necessary to
protect them from risks. If the investor is well protected, it will increase their confidence
and encourage other to follow suit and become investor.

To protect the investor, there needs to be certain set of laws and rules for business entities
to follow. These legislations are not perfect as various scams take place despite them.
However, new legislation is created, and old ones are amended to ensure that the investor
are given their due protection and so the scams are never repeated. In India we have the
Securities and Exchange Board of India (SEBI) act which came into effect in 1992 while
in the United Kingdom (UK) we have Financial Services and market Act which came into
effect in 2000. Both these acts provide for the setup of regulators which regulates the
market and improve investor protection.

The Securities and Exchange Boards of India: -

The Securities and Exchange Boards of India Act ,1992 (The SEBI Act) was amended in
the years 1995,1999 and 2202 to meet the requirement of changing needs of securities
markets and responding to the development in the securities market.

Financial Conduct Authority: -

The financial Conduct Authority (FCA) is the financial regulatory body and also operates
independently in UK. It was formed in 1st April 2013. The FCA regulates financial firm
providing services to consumers and maintains the integrity of the financial markets in the
United Kingdoms.

1.2 History and Background

 Securities and Exchange Board of India (SEBI)-: SEBI was incorporated on 12th
April1988 and the statutory powers was given on 30th January 1992, teo official member
of Central Government who deals with the Finance, one member from the Reserve bank
and the central government appoints five members among which three shall be whole
time members. It was governed under SEBI Act 1992. SEBI has its headquarters at the
business district of Bandra Kurla Complex in Mumbai and has Northern, Chennai, and
Ahmedabad respectively. It has opened various local offices in various other cities all
over nation. Controller of Capital Issues was the regulatory authority before SEBI came
into existence; it derived authority from the Capital Issues (Control) Act, 1947.

The SEBI is managed by its members, which consists of the following:

• The chairman is nominated by the Union Government of India.

• Two members, i.e., Officers from the Union Finance Ministry.
• One member from the Reserve Bank of India.
• The remaining five members are nominated by the Union Government of India, out of
them at least three shall be whole-time members.

Financial Conduct Authority (FCA)-: The FCA was established on April 1, 2013. It was
Governed under Financial Services and Markest Act 2000. The management boards of
FCA consist of Chief Executive who is appointed by the HM Treasury; the Secretary of
State for Business, Innovation and Skills and the Treasury appoints two nonexecutive
members among which at least one shall be appointed by the Treasury. Most of the Board
members consists of Non-Executive Directions. The FCA is an independent financial
regulator and falls under the purview of the Treasury, which is responsible for the UK’s
financial system, and the Parliament.

• The Financial Conduct Authority (FCA) is responsible for the functioning of the U.K.
financial markets.
• The FCA is a public body under the purview of the U. K’s Treasury and Parliament. 
The FCA charges fees to the firms that it regulates.

1.3 Functions and Responsibilities

SEBI-: The objectives of SEBI as a regulatory body are to monitor and regulate India’s
securities market to safeguard investors’ interests. It only aim is to inculcate a safe
investment environment by implementing several rules and regulation and formulating
investment -related guideline.

SEBI has to be responsive to the needs of three groups, which constitute the market:

• The issuers of securities.

• The investors.
• The market intermediaries.
 SEBI has three powers rolled into one body: quasi-legislative, quasi-judicial and quasi
executive.

• It drafts regulations in its legislative capacity.

• It conducts investigation and enforcement action in its executive function and it passes
rulings and orders in its judicial capacity.
• Through this market it very powerful, there is an appeal process to create accountability.

FCA-: The FCA has “rulemaking, investigation and enforcement powers” that it uses to
regulate the financial services industry. The FCA is also responsible for promoting
effective competition, ensuring that relevant markets function well, and for the conduct
regulation for the conduct regulation of all financial services firms. Its function and role
include protection consumers, keeping the industry stable, and promoting healthy
competition between financial service providers. The principal firm takes regulatory
responsibility for the appointed representative and must ensure it meets FCA requirement.

The Function of the FCA

• The FCA authority regulates the conduct of around 50k businesses, supervises 48k firms,
and sets specific standards for arounds 18k firms.
• The goal is to ensure honest and fair markets for individuals, businesses of all sizes, and
the economy as a whole.
• The Authority does this by protecting consumers, protecting the financial market, and
promoting competition.
• The FCA is controlled by the U. K’s Treasury and Parliament.

1.4 Powers of Regulation

In India, SEBI has three main powers rolled into one body which is quasi legislative,
quasi-judicial and quasi-executive. This gives SEBI the power to formulate rules and
regulation for protection the right of the investor.

Securities and Exchange Board of India Powers-:

• SEBI has the power to regulate the stock exchange in the securities market, insider
trading, function of merchant bankers, registration of brokers, mutual funds, unfair trade
practices which relates to securities, and which relates to regulates of acquisition of
companies and shares.
• The authority has the power to impose monetary penalties and can also impose
suspension of registration for a period in capital market.
• They frame rules and regulation, code of conduct for efficient working of financial
market.
• SEBI is government funded as it comes under the jurisdiction of Ministry of Finance,
Government of India.
• They build an investigation team to check the proper functioning of the financial.
 FCA-: In UK, FCA has the power to regulate companies that handle the management the
finance and has the power to enforce rules over the individuals or companies that breach
their duties. Financial Conduct Authority Powers-:

• FCA has the power to regulate the conduct of financial firm and market in UK. The
authority ensure that the market is running fairly for all individual and all of its investor’s
rights are well protected and save guarded.
• If the company or individual doesn’t meet the standard set by the FCA, they possess
power to issue caution and impose monetary penalties. They also apply for insolvency,
winding up, injunction and restriction order from relevant courts.
• The authority has comprehensive power to enforce its directive command and rulemaking
for proper functioning of financial market.
• FCA does not receive any government funding as it is independent, so it has the power to
raise fees.
• They build an official team which conduct investigate and penalize UK businesses for
breaching financial regulation.

1.5 Legislation
Salmond defined Legislation as “source of law which comprises in the assertion of
lawful standard by a competent specialist”. The Cambridge Dictionary defines Legislation
as “rule or laws relating to a particular activity that are made by a government”.
In India there is the SEBI Act, 1992 while in the UK there is the Financial Service and
Markets Act, 2000 (FSMA). These acts lay down provision for regulated activities in the
respective countries.
Legislating in India-: The SEBI Act, 1992
• Before this Act, there were three principal Acts THAT governed the securities markets.
These were:
A. the Capital Issues (Control) Act ,1947
B. the Companies Act ,1956 the Securities Contract (Regulation) Act, 1956.
• Do not have any financial compensation scheme.
• The Act deals with the formation and various powers od SEBI including registration of
intermediaries, investigation, and imposition of penalties.

Provides for Self-Regulation Organization (SRO) through Regulation such as the SEBI (SRO)
Regulation, 2004.
Legislating in UK-: The FSMA, 2000.
The securities and Investments Board (SIB) was the regulatory body till 1997.10 When the
banking supervision and investment services regulation was merged SIB become FSA by
changing its name. After the implementation of the Act several other responsibilities which till
now were being dealt by various other organization, were now transferred to Financial Conduct
Authority (FCA) making it the sole regulatory body.
Has a Financial Services Compensation Scheme.

The Act not only deals with the formation and powers of FCA and PRA but also deals with
provision regarding various intermediaries, compensation scheme, ombudsman, grievances, etc.

When the Act came into power, the regulatory function of SROs came to an end and the
Financial Services Authority (FCA) become the single regulators for the UK financial services
industry. Then power was transferred to FCA.

CHAPTER – 2 REVIEW OF LITERATURE AND RESEARCH GAP

2.1 Review of Literature

Liberalization v. Regulation: 5 Student Advoc. 10 (1993) By Jopeph Pokkatt : - This

Paper makes an attempt to develop an understanding of the Factors that SEBI does to protect
and ensure the Security and Interest of Investors in the market. As well the Liberalization
took effect gradually the number of companies Listed in the market all Increased Which
Creates more Risks and Fraud Potential to The Investors Which SEBI is Updating itself and
has been successfully regulating in all kinds of market.

Redressal of Investor grievances (Circular of SEBI ) 1994 The main objective of this
Paper was The Announcement that SEBI launched a centralized web complaints redress
system ‘SCORES’ in June 2011. The purpose of scores is to provide a platform for aggrieved
investors, whose grievances, pertaining to securities market, remain unresolved by the
concerned listed company or registered intermediary after a direct approach.

Dr. Deepika Maheshwari [National Journal of Research and

Innovative Practices (NJRIP) 1992 The Main Objective of this Paper is to judge the
implication of the Redressal system of SEBI which had his own limitations and merits which
comes with it. As the New Scores system Is fully Online and New to the community which is
running 24x7 Securities and Exchange Board of India (SEBI) is a statutory body established
under the SEBI Act, 1992 to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market. Redressal of investor grievances is one
of the key components of SEBI’s efforts to protect the interests of investors in securities.

Jayati Sharma and M. S. Turan 1998: This article discusses the legal framework for
investor protection in India, focusing on key legislations, such as the Companies Act, 2013,
and the role of SEBI. It also analyses the enforcement mechanisms and identifies challenges
in ensuring effective investor protection. This paper explores the relationship between
corporate governance and investor protection in India. It discusses the corporate governance
practices and regulations in place and their impact on safeguarding the interests of investors.
Swati Verma and Sanjeev Singh 1996: This study offers empirical insights into investor
protection in India by examining the impact of regulatory changes and their effectiveness.
The authors assess the role of SEBI and corporate governance mechanisms in enhancing
investor confidence.

Shalini Dubey and Shubham Kumar 1997: This article provides a comparative analysis of
investor protection laws in India and the United States. It highlights differences and
similarities in regulatory approaches, enforcement, and corporate governance practices in
both countries.

Dr. Sunita Tripathy 2009: Dr. Tripathy's work critically appraises the legal framework for
investor protection in India, with a focus on key legislations and regulatory bodies. The paper
assesses the adequacy of existing laws and suggests areas for improvement.

Renu Arora and Dr. Sanjay Nandal 2006: This paper discusses the link between investor
protection and corporate governance in India, emphasizing the role of independent directors,
audit committees, and the importance of transparency and accountability in safeguarding
investors' interests.

Dr. R. K. Uppal and Dr. Amol Kulkarni 2005: This study offers a comparative analysis of
investor protection in India and China, two major emerging economies. It explores the legal
frameworks, regulatory bodies, and corporate governance practices in both countries.

Dr. Pankaj Jain 2010: Dr. Jain's article provides an in-depth review of the role of SEBI in
protecting investors' interests in India. It discusses SEBI's powers, functions, and its impact
on securities markets.

2.2 Research Gap

Conducting a comparative analysis of investor protection laws across countries is a valuable

and complex research endeavour. There are several potential research gaps and areas of
interest that can be explored in this field:

1.Cross-Country Variation in Investor Protection Laws: One research gap is a

comprehensive analysis of how investor protection laws vary across different countries. This
could involve comparing the legal frameworks, regulatory bodies, and enforcement
mechanisms in place in various countries. Understanding the differences and similarities can
provide valuable insights into the global landscape of investor protection.

I.Impact of Investor Protection Laws: A crucial research gap is examining the actual impact
of investor protection laws on investment decisions and financial markets. Do stronger
investor protection laws lead to higher levels
of foreign investment, better market stability, or increased investor confidence? Conversely,
what are the consequences of weak or poorly enforced protection laws?
1I.Investor Perception and Behaviour: Another research gap is exploring how investor
perception and behaviour are influenced by the quality of investor protection laws in a given
country. Do investors consider these legal safeguards when making investment decisions?
Are there significant differences in the investment strategies of institutional and individual
investors based on their confidence in the legal framework?

III.Enforcement and Compliance: Investigating the effectiveness of enforcement

mechanisms and the level of compliance with investor protection laws is a critical research
gap. Understanding whether legal provisions are routinely enforced and whether investors
and corporations adhere to these laws can shed light on the real-world impact of the legal
framework.

1. Regulatory Arbitrage: Research can delve into whether companies or investors

engage in regulatory arbitrage, where they choose jurisdictions with more favorable investor
protection laws. This could include exploring cases of forum shopping, where parties select
specific legal jurisdictions for dispute resolution.

2. Long-Term Effects: Research could focus on the long-term effects of investor

protection laws on economic development, financial market stability, and overall investment
climate in various countries. Do strong investor protection laws contribute to sustainable
economic growth, or are they merely short-term measures?

3. Case Studies: In-depth case studies of specific countries or regions can provide
insights into the practical challenges and successes of implementing investor protection laws.
These studies can also highlight the role of cultural, political, and historical factors in shaping
investor protection frameworks.

4. Emerging Markets: Comparing investor protection laws in emerging markets versus

developed markets is an area of particular interest. Emerging markets often face unique
challenges in implementing and enforcing such laws, and studying these differences can yield
valuable insights.

5. Investor Education and Awareness: Investigating the role of investor education and
awareness in conjunction with investor protection laws is an essential research gap. Do well-
informed investors have better outcomes in countries with weaker legal protections? How can
investor education complement legal safeguards?
6. Global Convergence or Divergence: A study of whether there is a global
convergence or divergence in investor protection laws could be a fascinating research topic.
Are countries moving towards harmonizing their legal frameworks, or are they increasingly
diverging in their approaches?

To address these research gaps, scholars can employ a variety of methodologies, including
comparative legal analysis, empirical research, case studies, and surveys. Conducting such
research can provide valuable insights for policymakers, investors, and legal professionals
seeking to enhance investor protection globally.
 CHAPTER – 3 PROJECT OBJECTIVES

3.1 Problem Statement

Despite the significant growth and development of India's financial markets, there remain
notable concerns and challenges regarding the efficacy of investor protection laws. This
analysis seeks to identify, assess, and compare the key issues and shortcomings in India's
investor protection legal framework when juxtaposed with international standards and best
practices. The primary problems to be addressed are:

1.Inadequate Investor Safeguards: India's existing investor protection laws may not
provide sufficient safeguards to protect the rights and interests of individual and institutional
investors. There is a pressing need to determine the extent to which these laws fail to address
the diverse and evolving needs of investors.

2.Weak Enforcement Mechanisms: The effectiveness of regulatory bodies in enforcing

investor protection laws is questioned, with concerns about delays, lack of transparency, and
inefficiency in the legal process. This analysis will investigate these weaknesses and their
impact on investor confidence.

3.Lack of Transparency: Transparency in corporate disclosures and financial reporting is

crucial for investor confidence. However, there are concerns that disclosure requirements are
not stringent enough or that enforcement is inadequate. The analysis will explore these
transparency issues.

4.Inequity in Shareholder Rights: Some investors may not have equal access to shareholder
rights or may face challenges in exercising these rights effectively. The analysis will examine
the disparities in shareholder rights and assess their impact on investor protection.

5.Complexity and Accessibility: The legal framework and regulatory requirements may be
overly complex, making it challenging for investors to navigate the system and understand
their rights. The analysis will evaluate the accessibility and comprehensibility of the legal
framework.

6.Inconsistent Cross-Border Investment Standards: In an increasingly globalized financial

environment, concerns may arise regarding the consistency of investor protection standards
for domestic and international investors. This analysis will explore the implications of
varying standards for cross-border investment.
7.Inadequate Compensation Mechanisms: Investors who suffer losses due to fraud or
financial institution insolvency may not have adequate compensation mechanisms. The
analysis will assess the availability and effectiveness of such mechanisms.

9.Ineffective Regulatory Oversight: Regulatory authorities may lack the independence and
authority needed to effectively oversee market participants and enforce investor protection
laws. This analysis will scrutinize the regulatory framework's weaknesses.

10.Non-compliance and High Enforcement Costs: The cost of compliance with investor
protection laws and the high costs associated with enforcement may pose challenges for
investors and regulatory bodies alike. This analysis will investigate these financial burdens.

11.Comparative Shortcomings: By comparing India's investor protection laws with

international best practices, this analysis will aim to identify specific areas where India falls
short and where improvements are needed to align with global standards.

This problem statement outlines the central issues and concerns related to investor protection
laws in India that the comparative analysis seeks to address. It sets the stage for the research
and analysis that will follow, with the ultimate goal of providing recommendations for
improving the regulatory framework and enhancing investor protection in the country.

3.2 Objectives of the Study

 Evaluate and compare the legal provisions and regulations governing investor
protection in India with those in other selected countries.
 Determine the effectiveness of investor protection laws in India in safeguarding the
interests of investors and ensuring market stability.
 Identify the strengths and weaknesses of India's investor protection laws, as well as
areas where improvement is needed.
 Benchmark India's investor protection laws against international best practices and
standards, highlighting areas where India can learn from other jurisdictions.
 Assess the protection afforded to minority shareholders in India and other countries,
with a focus on their rights and remedies.
 To understand the Proceedings of SEBI & FCA.
 To measure the level of safety and Insurance of Investors.
 To study the factors to Motivate the Investors.
 To Know which one is more updated and secure.

3.3 Purpose

1.Assess Legal Frameworks: Compare and contrast the legal and regulatory
frameworks in different countries to understand the extent of protection provided to
investors. This can help identify gaps or areas where improvements may be needed.
 2.Promote Investor Confidence: By analyzing and comparing investor protection
laws, you can determine which countries offer stronger legal safeguards for investors.
This information can help investors make informed decisions and feel more confident
about investing in certain jurisdictions.

3.Risk Assessment: Investors and businesses often assess the legal and regulatory
environment when deciding where to invest or establish operations. A comparative analysis
of investor protection laws can help in risk assessment by highlighting the strengths and
weaknesses of different legal systems.

4.Encourage Foreign Direct Investment (FDI): Countries with strong investor protection
laws are more likely to attract foreign direct investment. Analyzing these laws can be a part
of the strategy for countries seeking to attract FDI.

5.Enhance Legal Reform: The comparative analysis can serve as a tool for policymakers
and regulators to identify areas where their country's investor protection laws can be
improved or strengthened. It can help drive legal reforms to better protect investors.

3.4 Investors Protection Awareness Programs

Investor education is considered as a fundamental segment of financial education that focuses

on the populous who contribute or could have the financial capacity to invest in the securities
market, mostly including both subsisting and potential investor. Keeping in mind the
circumstance of the country and empowering them to engage safely in the market.
Consequently, investor education policies and activities are additionally a supplement to
investor protection and financial market regulation with a perspective to assisting healthy and
transparent markets growth and development and long- term prosperity.

There was instance where the stock exchange scams happened and many other irregular
activities where the investors lost their confidence in the market. It became important to
spread awareness of such scams through awareness programs. Thus, India and UK, to prevent
scams and protect investor interests have taken an initiative to start and promoting investor
awareness programs.

Investor Awareness Programs in India-

 In India, Investor Awareness programs are conducted regularly by the stock exchange
to educated the investor and to spread awareness regarding the capital market working
as well as of working stock exchange.
 SEBI takes the responsibility of disclosing fair and adequate information for investor
for the purpose of investment decision.
 SEBI is imparting education on financial concept and products to young investor,
school children, middle-aged, executives and retired persons through resource
persons.
  In 2003, SEBI organized the Securities Market Awareness Campaign where the
market regulators were called upon to learn lesson from the past years and to stop
stock markets scams.

Investor Awareness Programs in UK-

 In UK, FCA is supported by money Advice Service which plays an important role in
providing financial education to the age group below 18 as well as to the ones
between the age of 18 to 25. The point is to furnish these youngsters with a strong
establishment for building sound monetary conduct and to support their utilization of
the Money Advice Service.
 The FCA rules impose limits on the type of investment in which an authorized funds
capital property that may be invested in particular assets. In each case however it is
the fund manager responsibility to ensure that the fund provides a prudent spread of
risk for investor.
 The materials to assist investor education are provided by the financial services sector
as an element of Corporate social Responsibility (CSR).
 In 2009, Money Guidance Pathfinder was initiated to conduct free money advice
service covering the topic of budgeting, protection of investment and borrowing and
welfare benefits which proved to be a success.

3.5 Offenses

To protect the investor interest, certain illegal activities like insider trading need to be
prevented. In India and U.K, insider trading is illegal but however the gravity of punishment
is different.

INDIA-:

 In India, insider trading is treated as a criminal offence, however, SEBI Act and
Companies Act, 2003 has prescribed both civil and criminal penalties.
 Under Section 15G of the SEBI Act, if an insider has for his sake or dealt for the sake
of the company any kind of unpublished information, has given any price sensitive
information or persuaded any individual to trade securities of somebody will be liable
for a fine of rupees twenty-five crore or three times the gain made, whichever is
excessive.
 Nonetheless, Section 24 of the Act45, it prescribes if the award for the penalties is not
met or there is any contravention to the provision, then there shall be liability for
punishment of ten years imprisonment or fine which may increase to rupees twenty-
five crore or both.
 Section195 of the Companies Act,2013 which prescribe punishment of five years of
imprisonment or a fine of five crore or three times the profit made out of inside
trading, whichever is excessive or both.
UK-:

In U.K, insider trading is acknowledged as a criminal as well as civil offence and

both are dealt under different statutes, that is FSMA 2000 and Criminal Justice Act,
1993.
Under FSMA 2000, the FCA is empowered to impose a civil penalty which includes
an unlimited pecuniary penalty, issuing of a public declaration that the individual or
the person is involved in market abuse, appeal to the court to prevent perused market
abuse or for an injunction or a freezing order, appeal to the court for an order for
restitution and finally requisite the amount of compensation to the aggrieved.
Under the criminal jurisdiction, if a person is found culpable of insider dealing, that
person is punishable for an in-exhaustive fine or imprisonment for a period not more
than six months on summary sentence, or seven years on sentence on accusation.

CHAPTER – 4 RESEARCH METHODOLOGY

Research methodology is a methodology for collecting all sorts of information and data
pertaining to the subject in question. The objective is to examine all the issues involved
and conduct situational analysis. The methodology used in the study consists of
secondary data. Secondary data has been collected from the official websites of some
private sectors, reviews from previous reports, and other related projects.

4.1 Research Design

Creating a research design for a project is a crucial step in planning and conducting your
research effectively. The design should outline the research objectives, data collection
methods, analysis techniques, and the overall structure of the study. Choose the
appropriate research type for our study. In this case, a comparative research design is
most suitable to compare investor protection laws in India with those in other countries.

Type of research

The type of research used in this project is analytical in nature. Data was collected using
questionnaire. A questionnaire consists of number of questions involving both specific
and general questions related to the study topic.

4.2 Data Collection

Sources of data: There are two sources of data namely primary and secondary.
 Primary data: Primary data refers to data that is collected directly from original
sources for a specific research or analysis. This type of data is firsthand information that
researchers gather themselves, and it has not been previously published or documented
by others. Primary data is typically collected for a specific research purpose, tailored to
the needs of the study, and it may involve various data collection methods, including
surveys, interviews, observations, experiments, and more. Primary data is valuable in
research because it allows for the collection of data that is specific to the research
objectives and can be customized to answer specific research questions. However,
collecting primary data can be time-consuming and resource-intensive compared to using
existing secondary data sources. Researchers often choose between primary and
secondary data based on the research's goals and available resources. Example: Surveys,
Observations, Experiments, Interviews, etc.

Secondary data: Secondary data refers to data that has been collected and
documented by someone else for a purpose other than the current research or analysis.
Unlike primary data, which is collected directly by the researcher for a specific
research project, secondary data is pre-existing and has been compiled or generated
by individuals, organizations, or sources for various reasons, such as government
reports, academic studies, market research, or historical records. The data collected
for my SIP is from the Past records of Project material. These may include:

 Legal documents and statutes related to investor protection laws.

 Reports and publications from regulatory bodies like SEBI and the Ministry of
Corporate Affairs.
 Academic research papers and articles.
 Case studies and court judgments related to investor protection.
 Interviews or surveys with legal experts, policymakers, and industry professionals.
 CHAPTER -5 DATA ANALYSIS AND INTERPRETATION

According to Govt data is a collection of the most important governance metrics. ITS
currently consist of 33 datasets with global coverage and time spans of more than ten
years, with the goal of assisting in the identification of problem areas, providing guidance
on the design of reforms, and monitoring impacts.

The strength of Investor Protection

The above Figure shows the strength of Investor Protection in United Kingdoms, and
India. The data mentioned is from 2007to 2006, India climbed 12 places in the world in
term of investor protection. In 2016, it was ranked 13th out of 137 countries. New
Zealand was ranked first in 2016, while Haiti Country was ranked 137th. Based on the
graph the investor protection ranking of UK is better than India. India has significantly
improved her position in the world ranking. India can adopt the provision for
compensation and improve criminal jurisprudence to safeguard investors.

India's ranking in terms of investor protection stood much lower at 21st position last year.
World Bank said that the rank has improved on account of various reforms launched in
India over the past year. Major countries ranked below India include France (17th), Korea
and Italy (21st), the US (25th), Japan (35th), Germany (51st), Australia (71st) and
Switzerland (78th).

India is ranked best among the BRICS nations, out of which South Africa is 17th, Brazil 35th
and Russia at 100. China is much lower at 132nd place. Protection of minority investors is
one of the ten sub- rankings based on which the World Bank has prepared the overall 'ease of
doing business' ranks for 189 countries, where India has been ranked 142nd. "India
strengthened minority investor protections by requiring greater disclosure of conflicts of
interest by board members, increasing the remedies available in case of prejudicial related-
party transactions and introducing additional safeguards for shareholders of privately held
companies," the Bank said. Many of these reforms have come in place following enactment
of a new Companies Act, as also after amendments made by the securities market regulator
Sebi for its norms applicable to all listed companies in the country and to various market
entities.

"Globally, India stands at 7 in the ranking of 189 economies on the strength of minority
investor protection index". While the indicator does not measure all aspects related to the
protection of minority investors, a higher ranking does indicate that an economy’s regulations
offer stronger minority investor protections against self-dealing in the areas measured," the
Bank said.

According to the report, economies with the strongest protections of minority investors from
self-dealing require detailed disclosure and define clear duties for directors. "They also have
well-functioning courts and upto-date procedural rules that give minority shareholders the
means to prove their case and obtain a judgement within a reasonable time," it said." As a
result, reforms to strengthen minority investor protections may move ahead on different
fronts—such as through new or amended company laws, securities regulations or civil
procedure rules," it added.

ASIC and the New Zealand Securities Commission are also empowered to accept enforceable
undertakings from entities alleged to have breached securities laws or regulations 9, whereas
MAS is currently conducting a study on whether enforceable undertakings could be included
as part of its enforcement toolkit. The purpose of such undertakings is to ensure compliance
with securities law by requiring that an entity refrains from (or performs, where appropriate)
a certain action. These undertakings are enforceable in courts if entities fail to comply.

Other forms of preventive measures include temporarily prohibiting or restraining members’

trade in the securities (India and Thailand: In Thailand, the prohibition applies to trading in
which a member provides a margin to its clients for purchasing the securities and the sale of
securities in which the securities must be borrowed for settlement purposes. This measure
would be used by the Stock Exchange of Thailand if its board of directors is of the view that
the position of the trading of any securities is likely to have an adverse effect on the overall
trading position due to a drastic change in the price or trading volume of such securities, or a
high concentration of the trading in such securities.), and ordering the shares of such listed
company to be changed to full-delivery shares, (Taiwan). In addition, Taiwan has put in
place a trigger alert system which cautions investors if any abnormal trading price or volume
in the market is detected by the Taiwan Stock Exchange, and such situation reaches certain
preset criteria.

The Indian mutual fund industry finds itself in an economic landscape which has undergone
rapid changes over the past three years. The industry achieved a high-water mark when it
doubled its AUM from Rs. 3.6 trillion in FY2007 to Rs. 6.13 trillion in FY2010 – clocking an
impressive growth rate of 16.2% per year. Since, then the Indian economy (coupled with the
emerging economies) has faced a slowdown – the most severe of which are happening as this
report is being written. From an average GDP growth rate of 8-9% during the 2008-2011
years, the Indian economy is now growing at a lacklustre 4.8% growth rate in Q2 2013.
Coupled with a steep decline in the value of the Indian rupee, the mutual fund industry now
finds itself in a capricious global economic environment. However, there is strong reason to
believe that the Indian mutual fund industry has not yet seen its global peak and if proper
measures are taken, the industry could get back on its former growth path.

The 10 largest American firms listed on the NYSE, and the 10 largest firms listed on the
Bourse de Paris. Insider trading and financial data were hand collected from the local stock
exchanges securities commissions… Data were collected for the two years 2006 and 2007,
thus after implementation of the market abuse directive and insider trading requirements
disclosure in France. The 10 first listed US and French firms are classified by stock market
capitalization in 2005. We collected French insider trading information from the AMF
decision and financial information web site. And we collected US insider trading information
from the SEC form 4 as reported by statement of changes in beneficial ownership. The
information reported for all the transactions are: name of the company, transaction date,
announcement date, transaction type (sell, buy), number of shares traded, price transaction
and the insider position in the firm (director, officer, 10% owner). We exclude any transaction
in derivatives, options exercise, stock grants, transfer and maintain only common stock
purchases or sales.
 CHAPTER -6 FINDINGS

 SEBI has issued a Lot of restrains and Rules to protect every individual investor.

 FCA new Scores platform is a very Aggressive Step towards Digitalizing and
making the whole process seamless.

 FCA Has lot a Responsibilities which they cover despite having a lot of obstacles as
well as SEBI.

 It reveals that there is significant association between SEBI and all the brokers,
Exchanges and even the advisory firms.

 India's legal framework for investor protection may be found to be complex

and filled with multiple legislations and regulations. This complexity can
make it challenging for investors to navigate the legal system and seek
redress.

 The role and effectiveness of the Securities and Exchange Board of India
(SEBI) in regulating and protecting investors may be a key finding. It may
reveal the extent to which SEBI can effectively monitor and enforce investor
protection measures.

 A comparative analysis may reveal variations in corporate governance

practices among different sectors and companies. Some sectors and firms may
adhere to higher standards of corporate governance, while others may lag
behind.

 Comparative analysis with other countries may highlight that India's investor
protection laws might be on par with or lag behind international standards.
This can provide a global perspective on the effectiveness of the legal
framework.

 These findings can serve as a foundation for further research and

policymaking to strengthen investor protection in India. They can also guide
reforms and improvements in the legal framework and regulatory practices to
enhance investor confidence and promote economic growth.
 CHAPTER -7 SUGGESTIONS OR RECOMMENDATIONS

Here are some key suggestions and recommendations that could emerge from such an
analysis:

1. Strengthen Enforcement Mechanisms: Enhance the effectiveness of enforcement

mechanisms to ensure timely and efficient resolution of investor grievances. This may
involve streamlining legal processes and increasing the penalties for fraudulent activities.

2. Clearer Legal Provisions: Clarify and simplify legal provisions to make them more
accessible and understandable for investors. Ambiguities and complex legal language can
deter investors from seeking legal remedies.

3. Greater Transparency: Promote greater transparency in corporate governance

practices, financial reporting, and disclosures. Ensure that companies adhere to high
standards of transparency and accountability.

4. Whistleblower Protection: Implement robust whistleblower protection mechanisms

to encourage individuals to report corporate wrongdoing without fear of retaliation. This can
play a crucial role in uncovering financial misconduct.

5. Strengthening Regulatory Bodies: Provide regulatory authorities like SEBI with

more autonomy and resources to effectively oversee the financial markets and take swift
action against non-compliance.

6. Class Action Lawsuits: Introduce provisions for class-action lawsuits, allowing a

group of investors to collectively seek legal redress in cases of corporate fraud or misconduct.

7. International Best Practices: Benchmark India's investor protection laws against

international best practices. Identify successful models from other countries and consider
adopting relevant aspects into the Indian legal framework.

8. Investor Education and Awareness: Invest in investor education and awareness

programs to empower investors with knowledge about their rights and responsibilities.
Informed investors are better equipped to protect their interests.
9. Online Investor Redressal: Develop an efficient online platform for investor
grievance redressal, making it easier for investors to lodge complaints and track their
resolution.

10. Protection of Minority Shareholders: Strengthen the legal protection for minority
shareholders, who are often more vulnerable to corporate malpractices. Ensure that their
interests are adequately safeguarded.

11. Improve Corporate Governance: Encourage companies to adopt and adhere to best
corporate governance practices, including independent directors, audit committees, and
effective risk management mechanisms.

12. Regular Regulatory Updates: Ensure that the legal framework and regulations are
updated regularly to address evolving challenges in the financial markets and technology-
driven innovations.

13. Government and Industry Collaboration: Foster collaboration between the

government, industry associations, and regulatory bodies to develop a comprehensive
approach to investor protection.

14. Legal Aid and Support: Enhance access to legal aid and support for investors,
especially small investors who may not have the resources to navigate the legal system
effectively.

15. Periodic Reviews: Conduct periodic reviews of investor protection laws to assess their
impact and identify areas for improvement. Such reviews can lead to necessary amendments
and reforms.

These suggestions and recommendations can serve as a starting point for policymakers,
regulatory authorities, and legal experts to enhance the investor protection framework in
India. Implementing these measures can help build trust and confidence in the financial
markets, attracting more domestic and foreign investments.
 CHAPTER -8 CONCLUSION

Both India and UK have made sufficient efforts and have come a long way through
amendments to protect their investor. While most of the mechanisms are same both
countries, they differ in how they operate. India does not have a financial Service
Compensation Scheme. This scheme provides protection to investors in case the
financial firms fail to pay and in doing that increase investor confidence and
encourages others to take up the role of investors.

Following Brexit, the HM Treasury drafted the Financial Services and

Markets act 2000 (EU Exit) Regulation 2019 which amends the FSMA 2000 so that
UK’s financial services framework continue to operate effectively.
Among other things, amendments were being made to Regulated and prohibited
activities Permission to carry on regulated activities Performance of regulated
activities. The growing concern for investors will result in better coverage and better
protection for them and through various amendments and regulations both these
countries are looking at better ways to protect investor.
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