RIGHTS AND OBLIGATIONS OF SMALL INVESTORS

Transcription

1 RIGHTS AND OBLIGATIONS OF SMALL INVESTORS Presented By K.N Ramanatha CEO BgSE Financials Ltd WHO IS AN INVESTOR?? An individual who commits money to investment products with the expectation of financial return. Generally, the primary concern of an investor is to minimize risk while maximizing return, as opposed to a speculator, who is willing to accept a higher level of risk in the hopes of collecting higherthan-average profits. Section 2(f) of SEBI (Investor Protection and Education Fund) Regulations 2009 says Investor means an Investor in Securities. Section 58 AA (11) of Companies Act 1956 defines small depositor as one who has deposited in a financial year a sum not exceeding Rs in a company. 1

2 SEBI The SEBI is the regulatory authority established under Section 3 of SEBI Act 1992 to protect the interests of the investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith and incidental thereto. The Securities and Exchange Board of India (SEBI) has been mandated to protect the interests of investors in securities and to promote the development of and to regulate the securities market so as to establish a dynamic and efficient Securities Market contributing to Indian Economy. SEBI strongly believes that investors are the backbone of the securities market. They not only determine the level of activity in the securities market but also the level of activity in the economy. Grievance Redressal portals SEBI provides on-line grievance redressal process ( Free Investor Helpline set up by Midas Touch Investors Association (funded by Investor Education and Protection Fund) ( sponsored by Ministry of Corporate Affairs, GOI. All and sundry complaints entertained including nonreceipt of dividend, intimation about shares sent for transfer, demat, remat, bonus shares, refund money as well as fixed deposit related matters are handled. Powers bestowed on the Exchanges as per Clause 49 of Listing Agreement to handle errant Companies. 2

3 Investors Protection Fund & Investor Services Fund The Fund will be used for the protection of investors and promotion of investor Education and awareness, in ways like Education activities including Seminars, Training, Research and Publications aimed at Investors Awareness Programmes through Media print, electronic, aimed at Investors. Funding Investor Education and Awareness Activities of Investors Associations recognised by the SEBI Aiding Investors Associations recognised by SEBI to undertake legal proceedings in the interest of investors in securities that are listed or proposed to be listed. Debate on the need for a separate legislation for protecting the interests of small investors considering that there are multiple agencies involved in policing Companies that raise funds from the Public. SEBI, RBI, DCA (Dept. of Company Affairs) for complaint redressal - Should there not be a Common Regulator???? Investor Rights Movement (Shareholder Activism) refers to the efforts of shareholders of publicly traded companies to ensure managements are more accountable for their actions. This movement seeks to improve disclosure, accountability and responsibility among company managers. Responsibility at the time of applying for Public Issues Read the Prospectus/Abridged Prospectus carefully Note Risk Factors pertaining to the issue Outstanding litigations and defaults, if any Objects of the issue Company History Background of promoters Instructions before making applications Use ASBA from now own Do not fall prey to market rumours Do not go by implicit/explicit promise made by the issuer or any one else Do not bank upon bull run post listing 3

4 . Responsibilities while investing in Mutual Fund Scheme Read the offer document carefully Investments in Mutual Funds may be risky Deal only with registered Agents of AMFI Invest depending upon your investment objective and risk appetite do not invest just because somebody is offering you a commission or other incentive, gift etc. Do not fall prey to unrealistic returns Net Asset Value of a scheme is subject to change depending upon market conditions Past performance of a scheme is not an indication of future performance Keep track of NAV. Ensure to get Account Statement periodically Update yourself on the performance of the scheme on a regular basis Lastly, do not hesitate to approach concerned persons and authorities for any problems. Dealing with Secondary Market Intermediaries Deal only with SEBI registered intermediaries (Brokers & Sub-brokers). Satisfy yourself about the credentials of the broker by asking for information/documents supporting his claims. Before activating your trading account, obtain clear idea from your broker about all brokerage, commissions, fees and other charges which will be levied on your trades. Furnish details in full as are required by the broker as required in know your client (KYC) norms. Ensure that a contract note is issued by the broker which contains complete records of every transaction within 24hrs of the execution of the contract. Insist on Bill for every settlement. In case pay-out of money and / or securities is not received on the next working day after date of pay-out, follow up with the concerned broker for its release. If it is not released within five working days, ensure to lodge a complaint immediately with the Investors Grievance Cell of the exchange. Ensure to receive a complete Statement of Accounts for both funds and securities settlement every quarter. 4

5 Rights & Responsibilities Rights: to take up complaints against Member with the Exchange within reasonable time. to take up complaints against erring listed Companies. to file arbitration against Members in case of trade dispute. to challenge the arbitration award before the Court of Law. to participate and vote in general meetings. to receive Annual Reports etc. to participate in resolution meetings. Responsibilities: to remain vigilant about the company/intermediary to pay/deliver securities as and when called upon to do so to exercise the rights conferred on you. Games the Companies play Triplex Overseas Ltd. declared Bonus 3:2 (Apr 07) Promoters stake nose dive from 14.91% in March 07 to 0.01% in Sept 07- Now suspended from Trading Vishal Expoorts Overseas Ltd. declared Bonus 2:1 (Aug 02) Promoter holding was 75% in Dec 04 nose diving to 13.60% in March 09 Price fallen from Rs. 5 in Jan 08 to Rs. 1 in Splash Media Works Ltd. declared Bonus 3:1 (Nov 09) Promoter stake nose dives from 24.61% to 12.58% (March 09) Entire promoters stake is pledged. In Jan 10 pomoter directors resigned as financiers sold the pledged stock. EGM on 6 March to consider take over of Company by Bhrosemand Commodities. Remington Rand declared 1:2 bonus in 1986 not issued so far Midwest Leasing declared 1:25 bonus in 1992 not issued so far Motoral India declared 1:1 bonus in 1996 not issued so far An Investor should evaluate securities broadly on following criteria: Liquidity,Safety,Returns,Tax savings 5

6 Grievance Redressal Mechanism The following types of grievances should be taken up with: With the Stock Exchanges at their Investor Information Center: Complaints related to securities traded/listed with the exchanges. Complaints regarding the trades effected in the exchange with respect to the companies listed on it or by the members of the exchange. Issue of duplicate share certificates. Grievances undertaken by SEBI Grievance against a listed company/intermediary registered with SEBI. In the event of such grievance an investor should first approach the concerned company/ intermediary against whom you have a grievance. However, an investor may not be satisfied with their response. SEBI takes up grievances related to issue and transfer of securities and non-payment of dividend with listed companies. In addition, SEBI also takes up grievances against the various intermediaries registered with it and related issues. Recourses available to an Investor for redressing his grievances Office of Investor Assistance and Education (OIAE) : A person can lodge a complaint with OIAE Department of SEBI against companies for delay, non-receipt of shares, refund orders, etc., and with Stock Exchanges against brokers on certain trade disputes or non receipt of payment/securities. Arbitration: If no amicable settlement could be reached, then an investor can make application for reference to Arbitration under the Bye Laws of concerned Stock Exchange. Court of Law 6

7 NSE- dealing with Investor Grievances All complaints in respect of companies listed on NSE should be addressed to Investor Grievance Cell- The IGC takes up complaints for redressal in respect of: a. Trades executed on the NSE through its NEAT terminal and routed through the NSE trading member or SEBI registered sub-broker of NSE trading member. b. Trades pertaining to companies traded on the NSE. The investors are therefore required to furnish relevant contract or purchase/sale notes for referring their case to the Investor Grievance Cell. Complaints against Trading Members/sub-brokers Complaints received from the investor if accompanied by all the relevant documents then it is forwarded to the respective TM/sub-broker asking them to provide their comments or for resolving the case. The TMs are expected to file their replies within 21 days. Complaints against Companies/Shares Transfer Agents & Registrars (STAs) Complaints received from the investors are forwarded to the respective Companies/STAs for necessary action at their end. In case no response is received from the company/stas within 21 days, a follow-up by way of letters, telephone calls and personal meetings is undertaken to expedite their replies. NSE- Arbitration process Arbitration is a quasi judicial process of settlement of disputes between Trading Member, investor, clearing member, sub-brokers etc. Arbitration aims at quicker legal resolution for the disputes. When one of the parties feels that the complaint has not been resolved satisfactorily either by the other party or through the complaint resolution process of the Exchange, the parties may choose the route of arbitration. An investor can file the application for arbitration at the Regional Arbitration Centre (RAC) viz. Mumbai, Delhi, Kolkata or Chennai covering the state in which the Constituent ordinarily resides. Investor may attend the arbitration proceedings and defend the matter on his own or thro authorized representative to defend the matter. He also has the opportunity to use services of an advocate to represent the matter. 7

8 BSE dealing with Investor Grievances BSE has established a Department of Investors Services (DIS) to redress investors' grievances. The services offered by DIS are as under: (a) Investors' Grievances against Listed Companies- Investors' complaints against listed companies are forwarded by BSE to the concerned companies, with a copy sent to the complainant. The investors are advised to inform BSE if the complaints are not resolved within 30 days. If a company fails to redress the complaint within 30 days, BSE sends a reminder to the company.bse follows-up with the companies and / or their Registrar & Transfer Agents, to resolve such complaints. (b) Investors' Grievances against BSE's Trading Members- Investors are expected to submit their complaints in the prescribed Complaint Form. Effective from 31st January, 2009, the Complaint against trading members of the Exchange or Applications for Arbitration should be filed at the concerned Regional Arbitration Centre. BSE- Arbitration process With a view to ensuring speedy and effective resolution of claims, differences and disputes between non-trading Members and Trading Members and Trading Members inter-se, BSE has laid down an arbitration procedure. This procedure is duly embodied in the Rules, Bye-laws and Regulations of BSE, and duly approved by the Government of India/SEBI, under the Securities Contracts (Regulation) Act, Process- Applications may be filed by non - Trading Members against Trading Members and vice-versa. The disputing parties are advised to refer to Bye Law 252 of BSE, relating to 'Limitation', while filing an Arbitration application with BSE. Arbitration application forms (Form 1, 2, 1A, 2A; as applicable) along with Form 20, Claim Sheet, Check List, Instructions and list of Arbitrators could be downloaded from the BSE's website and is also available free of cost at Regional Arbitration Centres of BSE. 8

9 DO S FOR AN INVESTOR Get rid of the junk Diversify Believe in your investment Stick to your strategy Analyze your losses and learn from them Program Your Mind for small losses DON'TS FOR AN INVESTOR Don't trade on Rumors Don t trade unless you are Financed Don t use the markets to feed your needs for excitement. Don t panic Don t make huge investments Don t chase performance Don t ignore expenses. 9

10 THANK YOU 10