With investor participation already at abysmally low levels, the SEBI in its hurry and disregard for implications of it actions, may bring another nail down on the retail investor coffin
Virendra Jain of Midas Touch Investors Association sent a strongly worded letter to UK Sinha, chairman of the Securities and Exchange Board of India (SEBI) protesting the exit options provided by the market regulator to regional stock exchanges (RSEs) leaving lakhs of investors in these exchanges in a lurch. According to Jain, none of the guidelines issued by SEBI for RSEs, provide exit options for shareholders. In fact, none of the processes required for relisting have been probably instituted or overseen by the SEBI, he alleged.
“We once again request that RSEs should be de-recognized only after ensuring protection of interest of investors in companies exclusively listed on them and that (a) The exclusively listed companies on non-compliant stock exchanges have been listed on nation-wide stock exchanges or failing which (b) Such companies are 'compulsorily delisted' by the concerned regional stock exchange and their shareholders have received the exit price in accordance with Section 21 A [Delisting of securities) of the SCR Act and Rules and Regulations framed there under,” Jain said in his letter.
For those wondering what the hue and cry is about, here is the situation as it stands today. The letter states, “According to SEBI data, as on 1 March 2002, about 9,644 companies were listed on 23 stock exchanges all over the country. The number of investors in these companies totalled over two crore. Out of the 9,644 companies, 4,644 companies are exclusively listed on RSEs. The market cap of these companies would be above Rs2 lakh crore.”
Now we come to SEBI's latest directions with respect to these RSEs. SEBI had approved 'Guidelines' that would provide an exit option to RSEs, first on 29 December 2008, with revisions on 30 May 2012, and finally on 22 May 2014. In effect the guidelines set in motion, a process to de-recognise exchanges that had an annual turnover of under Rs1,000 crore before 30 May 2014.
Virendra Jain, in his letter points out that in the December 2009 circular, Paragraph 8 of the circular deals with pre-requisites for the de-recognition of RSEs that did not fulfil the turnover obligations. As quoted in the letter, Paragraph 8 of the guidelines says the following:
“In case of companies exclusively listed on those derecognised stock exchanges, it is mandatory for such companies to”
1. “Either seek listing at other stock exchanges or”
2. “Provide for exit option to the shareholders as per SEBI Delisting Guidelines / Regulations after taking shareholders’ approval for the same, within a time frame, to be specified by SEBI, failing which”
The letter goes on the say that none of these exits for the shareholders have been made available, and none of the processes required for relisting have been instituted or overseen by the SEBI. As always, this leaves the small investor in these companies out in the cold.
“At the outset, we would like to bring it to your notice that issue of 'vanishing companies' was raised by us only, way back in mid-1990s and order along with directions were issued by Allahabad High Court in 1999 on our public interest litigation (PIL) no659 of 1998. The central monitoring committee (CMC) and Task Forces have been working since then. We are aware of the ineffectiveness of the action taken and their results. For the retail investors, the exercise has been meaningless as none of them got any money back in the companies identified as vanishing nor a single rupee was recovered from such companies and their predatory promoters and directors by SEBI and Ministry Of Corporate Affairs (MCA). Further, the criteria of vanishing companies adopted by CMC is erroneous. No action has been taken by SEBI under the Securities Contracts (Regulation) Act, 1956 (SCR Act) against the companies identified as vanishing and their promoters, directors, Chartered Accountants (CAs) and company secretaries (CSs), ” Jain said in his letter.
Indian regulators, exchanges and intermediaries have never been famous for their investor friendly policies. This latest mess flies in the face of the SEBI “trying to protect investor interests.” Finally, the letter says, “Lastly, the stock exchanges which are in the process of de-recognition have huge assets, which vary from exchange to exchange. Generally, substantial part of these assets/ reserves have been built, over the years, through various concessions, tax rebates/exemptions given by the government and investor services funds etc. We request SEBI to issue detailed guidelines for treatment of these assets, their valuation and equitable distribution amongst all stakeholders. We emphatically demand and hope that SEBI would give meaningful representation to investors association for deliberations on this score.” Here's hoping that the SEBI will act swiftly and equitably in this instance.”
Earlier in March, the investor association raised the issue to non-compliance by companies. It was estimated that as much as Rs1 lakh crore of savings have been flushed down the drain because of poor supervision and regulation. This attitude continues to be evident in the regulators’ stand on public interest litigations (PILs) filed by Midas Touch Investors' Association. The PIL filed in the Delhi High Court alleges, among other things, that stock exchanges have failed, as first line regulators, to ensure compliance of the listing agreement by companies and take action in the event of non-compliance. How did SEBI react? Its affidavit in response says, the PIL is “devoid of merit”and has been filed by the petitioner “without appreciating the fact that the interest of the investors have duly been taken care of and protected” by SEBI.
The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) told a committee chaired by MS Sahoo in 2010-11, that 1,845 companies listed at BSE and 203 companies at NSE were not in compliance of the listing agreement terms. Trading in securities of most of these 2,048 companies (out of 5,000 companies listed on the BSE and NSE) has since been suspended leaving small shareholders holding illiquid shares. In effect, investors pay the price when companies do not meet listing norms—the companies themselves get away scot free. The table provides the number of companies that are suspended by the BSE each year since 1995.
Midas Touch estimates that the total value lost to investors due to these suspensions is a high as Rs1 lakh crore due to their investment in around 3,000 such companies listed on the BSE, NSE and 14 regional exchanges.
TV, radio, and Internet ads do not give objective investment advice. They are trying to sell you something. Step back, be objective, and evaluate your own needs and investing priorities
An investment in gold or another precious metal can be alluring.
“This is a no brainer,” you say. “I mean gold is one of the safest investments of all time.”
It might make sense for you. But you need to ask the right questions. And do some research.
Let’s take a trip down memory lane. History can be instructive.
The year is 1980. The economy is in the crapper. The 1970s were a tough slog, economically speaking. The glory days of America feel like they are over. Families are hurting. Panicked about the U.S. economy and the future of the U.S. dollar, people invest in gold. They “conservatively” buy it at $682 per ounce. They are told it’s a smart move and history shows it has performed incredibly well over the preceding decade.
But within two years of 1980 the value of an ounce of gold fell to a mere $310. Yep. Less than HALF of what investors paid. Two decades later, by 2001, the market value was just $256. Investors had to wait until 2007 to just break even on the $682 they paid.
The point illustrated here with gold also applies to other precious metals. Before you invest in any, consider the following:
• TV, radio, and Internet ads are ADS. They are not giving you objective investment advice, even if you think it is coming from a trusted personality. They are trying to sell you something. Step back, be objective, and evaluate your own needs and investing priorities.
• Don’t put your eggs in one basket. Any investment should be part of an overall strategy, which includes diversified assets such as stocks, bonds, real estate, etc.
• How long can you wait to break even?
• Consult an investing professional who can provide objective advice.
• Consider the different ways you can invest in gold (or other metals): gold stocks (e.g. shares of a company that mines gold), funds, bullion, bullion coins, and collectible coins. Understand the different risks and benefits of each.
• Make sure you’re dealing with a licensed broker and reputable dealer. FINRA, the Financial Industry Regulatory Authority, has a useful tool for that.
• Consider additional costs, such as insurance or storage.
• If you don’t take delivery of the metal yourself, make sure it actually exists. Federal and state regulators have taken action against a number of scam dealers, including one just recently against Gold Distributors Inc. Use an independent appraisal of the gold to make sure the seller’s price isn’t inflated.
• If a sales pitch minimizes the risk or urges you to act immediately, it’s a red flag.
• Always keep investing simple. Unnecessary complexity represents unnecessary risk.
Precious metal investments can be useful components of your portfolio. They can help you diversify and they can help hedge against inflation. Just play it smart.
More information about investment in metals can be found here.
SEBI found that Adel Landmark was collecting money from investors through various schemes withtout obtaining registration certificate from SEBI
Market regulator Securities and Exchange Board of India (SEBI) directed Adel Landmarks Ltd (formerly known as Era Landmarks Ltd) and its directors to shut down its collective investment scheme (CIS). SEBI also directed the company not to collect, any money from investors under its existing CIS schemes, lauch new schemes and divert funds collected from investors.
SEBI found that Adel Landmarks was engaged in fund mobilising activity from the public, by floating ‘collective investment schemes’ without obtaining certificate of registration from SEBI.
SEBI received several complaints about Adel Landmarks regarding the scheme launched by the company for pre-booking of plots in 'Cosmocity', Gurgaon. SEBI found that Adel Landmarks had mobilized crores of rupees from investors and failed to refund the same within the stipulated time.
SEBI said, “It appers that activity of fund mobilization by Adel Landmark under the 'scheme' with a resultant promise of returns when considered in light of peculiar characteristics and features of such scheme, satisfies all
four conditions specified in Section 11AA (2) of the SEBI Act.
Hence as per SEBI Act, 1992 and CIS Regulation, SEBI has directed Adel Landmark and its directors; Sumit Bharana, Arvind Kumar Birla, Manisha Bharana, Rakesh Kumar Gupta, Rashmi Bharana and its former directors;
• Not to collect any fresh money from investors under its existing scheme;
• Not to launch any new schemes or plans;
• To immediately submit the full inventory of the assets owned by company;
• Not to dispose of any of the properties or the assets of the existing scheme;
• Not to divert any funds raised from public at large;
• To furnish all the information sought by SEBI within 15 days from the date.