How does SEBI Protect the Interest of Investors?

Investors are the backbone of the Primary and Secondary Financial Market. The level of activity is determined by the investors.

Securities and Exchange Board of India (SEBI) has been established with the prime mandate to protect the interest of investors in securities. One of the missions of the SEBI is to promote the development and regulation of the Stock Market.

Who is an Investor?

An investor is one, may be an individual or a legal entity who invests capital in the venture or business but does not participate actively in the day to day management/ affairs of the business.

He is a person who invests to earn profit from instruments like Shares, Mutual Funds Debentures, etc.

What is Investor Protection?

Investor protection is a wide term that defines measures to protect the investors from malpractices of companies, merchant bankers, depository participants and other intermediaries.

According to the SEBI Act, 1992 “Investor protection” is ‘protecting the interest of the investors in securities and promoting the development of and to regulate the securities market and for matters connected therewith or incidental thereto.'

SEBI's role in Investor Protection

Investing activities become pleasurable if the investor knows

• How to invest.
• Where to invest
• What to invest in
• Has knowledge about markets
• There no malpractices
• And there is redressal for grievances for the malpractices

To address a few above such, which is illustrative

SEBI's investor protection strategy has four branches.

1. Educating the Investors or Investor Education and Awareness
2. Disclosure based regulatory Regime
3. Systems and practices which make transactions safe.
4. Redressal of Investor Grievances

1. Investor Education and Awareness

To protect the interests of investors in securities and to promote the development of, to regulate the securities market and for matters connected therewith or incidental thereto, the Central Government (GOI) has established a fund called Investor Education and Protection Fund.

SEBI conducts workshops to educate and spread awareness about the investments

SEBI answers the queries of the investors directly either through email , letters.

SEBI also publishes cautions through the media.

2. Disclosure based Regulatory Regime

Under this the issuers, intermediaries, etc., disclose about themselves, the product ,the market which helps the investors to take decisions carefully.

For these SEBI has come up with guidelines to monitor the disclosures regularly.

3. Systems and practices which make transactions safe

Screen based Trading: Screen based trading refers to a facility introduced by NSE which is fully automated nationwide, where a member can input into the computer the quantities of a security and the price at which he would like to transact, and the transaction is executed as soon as a matching sale or buy order from a party is found.

Dematerialisation of Securities: Dematerialisation means the process of converting the physical form of Certificates into E form reducing risks.

Implementing T+2 rolling Settlements: For years, there was weekly settlement (i.e every tuesday) done by NSE. which came down to T+3. Now there is T+2 settlement ( T stands for transaction day and numbers stands for days after transaction date)

A thorough screening is done on intermediaries ensuring only fit and proper person /agency can operate in the market.

4. Redressal of Investor Grievances

The investor may have complaints about companies or intermediaries.

The investor may approach the concerned company or intermediaries with their complaints.

If the complaints are not redressed or unsatisfactory, the investor may approach SEBI.

SEBI follows up with the Companies or intermediaries who haven't responded to the grievances.

To facilitate replies to various queries of the general public on matters relating to the securities market, SEBI has undertaken a new initiative and launched toll free helpline service number 1800 266 7575 or 1800 22 7575.

Catering to in 8 languages: English, Hindi, Bengali, Gujarati, Marathi, Kannada, Telugu and Tamil

SCORES (SEBI Complaints Redress System)

• SCORES is web enabled and provides online access 24 x 7. Set up by SEBI.
• SCORES enables investors to lodge and follow up their complaints and track the status of redressal of such complaints online from the above website.
• An email is generated acknowledging the registered complaint with a unique number.
• This is forwarded to the concerned entity for redressal.
• The entity uploads an Action Taken Report.
• SEBI pursues the Action Taken Report .
• Every complaint has an audit and trail.
• All the complaints are saved in a central database which generates relevant MIS reports to enable SEBI to take appropriate policy decisions and or remedial actions, if any.
• There is also a mobile app for SEBI SCORES.

Complaints under the Purview of SEBI

• Securities and Exchange Board of India Act,1992
• Securities Contract,(Regulation ) Act ,1956
• Rules and regulation made there under and relevant provisions of Companies Act,2013
• Depositories Act,1996.

These systematic measures taken by SEBI builds confidence and protects the investors from malpractices and unfair measures.