Regulations
Why Savers Have Stayed Away from Stocks for Two Decades
SEBI is preoccupied with more powers, hefty fines and other issues which have nothing to do with investor interest or protection
 
At Moneylife, we are of the firm view that investment in good stocks for the long term (7-10 years) is the only way that people can hope to beat inflation and grow their savings to last them through a couple of decades of life after retirement. Except ‘government servants’, who are on an inflation-adjusted salary and pensions, all of us have to worry about how much to save, to take care of galloping healthcare costs, cost of services, food and education. 
 
But investors dread the capital market and with good reason too. Moneylife has repeatedly pointed out, over the past 10 years, that India’s investor population has shrunk in the 25 years since we embarked on economic liberalisation. People are scared about investing in the market after being scammed by market manipulation, inadequate disclosures, dubious management practices and initial public offerings (IPOs) at inflated prices that seldom leave room for returns. Worse, complaints to the regulator are a waste of time and resources, since policy-makers have yet to grasp the fact that investors are more concerned about getting their money back than seeing the culprits punished.  
 
Yes, 25 years after the Securities & Exchange Board of India (SEBI) was set up as an independent regulator and its powers expanded comprehensively to make it one of India’s most powerful regulators, investor confidence in the capital market remains dishearteningly low. SEBI has never publicly acknowledged this issue, let alone address it. Hence, it was refreshing to read that Ashish Chauhan, CEO of the Bombay Stock Exchange (BSE), said recently that India’s investor population “has reduced in the last 20 years, despite many technological advances and there is a need to introspect as to what led to the fall.” Mr Chauhan estimates that India has 270 million investors; while the Indian middle-class has grown 10 times in the past two decades, the investor population has remained the same. Our estimate of the investor population is considerably lower. But acknowledging a problem is the first step towards addressing it. It is now important that the regulator also admits that there is a serious issue and works on fixing it. 
 
Unfortunately, SEBI is more focused on expanding its regulatory remit and increasing its punitive powers, rather than on redress of investor grievances. Although it is already one of the most powerful securities regulators in the world, SEBI is lobbying for powers to conduct search and seizure operations without getting a court warrant (as required under the regulations notified in September 2015). A court warrant is a basic judicial oversight prevalent in most developed nations to prevent flagrant misuse of powers by regulators; however, SEBI argues that local courts do not understand markets and are quick to grant stay orders to companies or individuals against SEBI action. A former SEBI law official is quoted as saying that getting permission for a raid leads to leakage of information and destruction of documents. If these are SEBI’s arguments to demand unbridled powers, then, we, the people, can make a far stronger case to hold the regulator accountable and make it less capricious and more transparent in its dealings. Consider this: 
 
  1. The casual manner in which SEBI used its power of arrest for the first time after the sweeping 2014 amendment of its Act itself makes a strong case against granting more powers to the regulator. Its action came in for serious criticism by the Bombay High Court.
  2. SEBI claims that information is leaked during a court process; but this is symptomatic of the massive corruption in India, including in SEBI. Let us also not forget the 2008 episode where a SEBI manager, Jerome K Alexander, colluded with market operator Nirmal Kotecha to fabricate an official SEBI letter which was sent to Pyramid Saimira asking it to make an open offer. SEBI was unconcerned that its order to send Pyramid Saimira into liquidation, instead of forcing a change in management, caused massive losses to shareholders and employees. There are other instances where even senior SEBI officials have been under scrutiny, including in the Saradha scam.
  3. There are innumerable examples where SEBI has steadfastly refused to act against certain powerful companies or has acted selectively, despite documentary evidence supplied to it. Helios & Matheson is one such case. Thanks to long years of inaction by SEBI, the company has effortlessly cheated hundreds of senior citizens who were lured to invest in its fixed deposits. 
  4. Media reports, including documents seen by this writer, suggest that SEBI did not act on specific information on Vijay Mallya’s foreign transactions when it was tracking Anil Ambani’s dealings with Union Bank of Switzerland (UBS).  
  5. In another case involving a powerful media house, SEBI’s refusal to act on written complaints for several years has, finally, landed up as a complaint with the Central Vigilance Commission. 
  6. Even on simple matters, like taking cognisance of anonymous complaints, SEBI has different standards. It will follow the rules and ignore anonymous complaints when it chooses to (including those against its own chairman) and go to the extent of seeking a response from the board of directors, in select cases. The rules vary according to the entity involved. 
  7. Finally, SEBI has landed in a soup over the Supreme Court’s (SC’s) interpretation of its discretion to reduce penalties under Section 15J of the SEBI Act, after it was amended, in 2002.  SEBI’s consent orders, as well as the penalties that it levied, have usually been decided without a clear and written linkage to the gravity of the wrongdoing. If one entity was levied a penalty of Rs1 lakh for insider trading, another may be slapped with Rs1-crore penalty, without any explanation. This game may have come to end with a case involving Roofit Industries. This company had repeatedly ignored SEBI’s show-cause notices amd had been slapped with a Rs1-crore penalty in 2002. The appellate tribunal cut it drastically, to Rs60,000, since Roofit was then on the verge of bankruptcy. SEBI filed an appeal and the SC delivered a bombshell in November 2015. It said that between the amendments of 2002 and 2014 to the SEBI Act, the wordings of the law provide the regulator no discretion to reduce penalties. On the contrary, the law was amended specifically to enhance penalties. SEBI is likely to seek a review of the order; but, until then, all undecided cases in the 12-year period (and there are many) will be in limbo. 
 
A common thread that runs through the examples cited above is that none of them benefits or relates to the ordinary investor who may have lost his shirt due to stock price manipulation, cheating by intermediaries, insider trading, poor accounting or dodgy disclosures. Whether SEBI collects a fat payment under consent proceedings or levies a hefty fine on a wrongdoer, who has been cheated by an intermediary or wrong corporate accounts and disclosures, there is no specific relief for the investor. 
 
SEBI’s policies must be framed to ensure grievance resolution rather than imposing penalties that only support its vast and expanding bureaucracy. Take the case of IPOs whose prices head south on listing. The intermediaries are directly responsible for disclosures and omissions in the prospectus. Investment bankers or auditors have almost never faced the music, so why will they mend their ways and ensure fair pricing? Until regulatory action is recast with investor interests in mind, only a few investors, with access to serious financial analysis or knowledge of trading, will invest in equities. All others will stay away. 

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COMMENTS

Sagar Rao

8 months ago

Really good article.

Fairy gada

8 months ago

Being a financial writer, I keep on praising SEBI in my blogs and articles and telling investors that SEBI is there for you...

Need to edit those sentences and add "theoritically SEBI is for investors..."

Pushpesh Kumar Sharma

8 months ago

hope this article helps to break the slumber of SEBI.
pushpesh kumar, bathinda, punjab

sundararaman gopalakrishnan

8 months ago

Excellent article..You have hit the nail on the head..SEBI works for the rich and powerful only.
The ordinary investor does not benefit at all thru SEBI's existence
No doubt, the common man is afraid of stock markets and instead parks his money in Gold and real estate

V ganesan

8 months ago

I am a mutual fund ifa I advice people to invest based on their needs and advice only for long term through systematic investment .But majority of the savers ask me returns .i reminded them my own experience Between years 1992 and 2002 market return is nil.I frankly point out that period .Where as savers ready to put money in insurance and ready to wait 15 to 20 years for a pathetic return.because confidence level is very high in insurance but people are not beleiving mutual funds or direct equities.I am not selling insurance .and lot og mf agents and insurance agents gave false promises and missold mf schemes at the 2003 to 2008 bullrun.

REPLY

Fairy gada

In Reply to V ganesan 8 months ago

This was helpful. Thanks.

manoharlalsharma

8 months ago

Why Savers Have Stayed Away from Stocks for Two Decades / Ans; is Not only SEBI but all of the agencies failed to deal with complaints and no one has time to followup year after years even courts r failed.

Mohan Sivanand

8 months ago

The question now is how will somebody convince investors that the stock market is a good place to grow wealth? Most people "invest" in insurance products because there are agents to lure them. An equity-investment culture can be created only if youngsters are financially educated. If that happens, the next generation will change things. It may now be difficult to convince older market-skeptics, especially those who may have lost money to scams and IPOs that never did well.

REPLY

Fairy gada

In Reply to Mohan Sivanand 8 months ago

My friend's father-65 years old, actively invests in d stock markets. My father-50 years old has 0 investments.

I dnt knw wht is he afraid of...

R Balakrishnan

In Reply to Mohan Sivanand 8 months ago

It is a constant dilemma in a country like ours. Savers, who cannot afford to lose money, are the ones who get badly impacted. They are all alone out there. My advise to people is that you should come in to equities, with money that you CAN afford to forget or lose. That, unfortunately, cuts out the majority of folks out there, who think that equities are a sure fire way to make money. The point, as Sucheta is making, is that we need a regulatory framework that protects us from fraud. Our risks just multiply, with careless regulators like these.

Divya Shah

In Reply to R Balakrishnan 2 months ago

i am new in Market. aur mere friend dalalstock.in ki services le rahe he. aur usne muje suggest kiya ki me bhi dalalstock.in ki servics lu. to mene google me dalal stock search kiya aur galti se dalalstocks.com ki service leli. aur uske bad meri capital zero hi hogai samjo.
to meri sab logo se guzaris he ki DalalStock.in se hi services le. dalalstock ka name use karke dalalstocks.com chala rahe he. dalalstocks.com se free me bhi services naa le.
kafi sare aise log hoge jo dalalstock.in aur dalalstocks.com me dhokha kha gaye hoge.
and sabse important baat ye hi dalalstock.in wale kabhi kisi ko samne se call nahi karte. agar aapko aisa koi call aaye to vo fraud he. because dalalstock.in ki services lene ke liye wait karna padta he.

Vivek Naik

In Reply to R Balakrishnan 8 months ago

excellent advice sir.

K. M. Rao

In Reply to R Balakrishnan 8 months ago

Sir, Why should I invest in stocks if I have to be prepared to forget or lose money when there are other alternatives ( atleast where my investment is safe) available ? This is the first stumbling block for those who can afford / want to invest in stocks. Unless this is satisfactorily addressed, no amount of "investor education" will help. Take my own case; I subscribed to this wonderful magazine and also to MSSN but I did not invest even a single rupee, though I can, as there are other safer and better options.

Fairy gada

In Reply to K. M. Rao 8 months ago

I dont think forget means to completely forget it. Just not to disturb it.

I read somewhere.. to cook the rice properly, proper amount of water must be added, accurate heat and time is required. if you keep on opening the lid again and again, you are spoiling the process. But this does not mean you have to forget that the stove is on.

this was compared to equity investing.

uttamkumar dubey

8 months ago

Nobody talks about transparency and even they does they dont implement it.

The rules and laws of SBI, LIC, PNB and alike can be floated by any powerful politicians to favor them making the country and people poorer...

i dont see any fairness, lets hope and pray for good luck and slowly gradually start to become corrupt.

Suketu Shah

8 months ago

One very important point I wish to make against MF agent,share brokers and esp wealth management companies-it is not that we investors are "greedy" for money and hence take high risk and lose money.It is that YOU PEOPLE fool us (due to our lack of knowledge) promising high returns and we fall for it.You people are cheats and frauds.We are not at fault.You people are at fault for cheating us with false promises when we used to be ignorant.We investors are NOT "greedy".

No wonder investors have fled equity markets as rightly pointed out in the super article above by Ms Dalal as SEBI has done nothing at all last several yrs to protect investors in equity markets or otherwise only watching the show like one is watching an Akshay Kumar movie.

Vaibhav Dhoka

8 months ago

SEBI's actions seem to be income garner SEBI never stood to to its PREAMBLE,For safeguarding investor but its action are anti investor and pro broker/corp orates.

AI Hyderabad flight makes emergency landing, all passengers safe
Mumbai : An Air India flight from Hyderabad made an emergency landing after smoke was detected emanating from its undercarriage here on Monday morning, official sources said.
 
The flight AI-620 had 120 passengers on board who were immediately evacuated by deploying chutes from the aircraft.
 
The prompt measures by the concerned authorities prevented a potential disaster and the plane was towed away for repairs.
 
Airport officials said around 7.30 a.m. when the flight was preparing to land, smoke was detected and it made an emergency landing as a precautionary step.
 
The cause of the smoke could not be immediately known, though officials denied there was a tyre burst.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Politicians amuse with gaffes on social media
New Delhi : Political leaders find instant social networking sites a convenient platform to instantly propagate their views or share their thoughts. But their over-enthusiasm often leads to gaffes that often acquire a life of their own, embarrassing them and their parties.
 
Very recently, some ministers in the Narendra Modi government made a fool of themselves by tweeting 'good wishes' on Good Friday - a day that marks the crucifixion of Jesus Christ. The distinguished group included Suresh Prabhu, Najma Heptulla, Dharmendra Pradhan and Mahesh Sharma. As Prabhu and Sharma tweeted "Happy Good Friday", Heptulla and Pradhan tweeted "warm greetings".
 
Bharatiya Janata Party leader Shahnawaz Hussain also followed with "warm greetings".
 
Only after the prime minister tweeted "Good Friday is a day of prayer and a day to remember the noble, pious and compassionate thoughts of Jesus Christ", the ministers realised the gaffe.
 
They immediately deleted their tweets. A few posted posted revised ones. Prabhu's new tweet read: "Today we commemorate the passion, suffering, death on the cross of the Jesus Christ. May this day of prayer enlighten our mind and bring peace."
 
Sharma wrote: "I wish you all blessings of Good Friday as a dedication to the sacrifice of Lord Jesus Christ and to remember his noble and pious thoughts."
 
The revised tweet of Heptulla was: "Good Friday a day for prayers and Jesus laid his life for mankind, and then he was resurrected."
 
Pradhan chose to remain silent. Hussian retweeted PM's tweet.
 
Union Minister of State for Home Kiren Rijiju's Facebook post earlier this month about supposed links between French seer Nostradamus' prediction 450 years ago and Modi's rule went viral on the social media.
 
Rijiju wrote that the much-quoted author of prophecies had predicted that between 2014 and 2026, "a man will lead India, whom initially, people will hate but after that people will love him so much that he will be engaged in changing the country's plight and direction".
 
His post added: "This was predicted in 1555. A middle aged superpower administrator will bring golden age not only in India but on the entire world. Under his leadership India will not only just become the Global Master, but many countries will also come into the shelter of India."
 
Rijiju's post also had a picture of Modi with German chancellor Angela Merkel along with others. Rijiju also talked about how the 2014 Lok Sabha election seat share of "BJP (2+8+3), NDA (3+3+7), UPA (5+8) and others (1+4+8)" added up to the prophetic number '13'. The minister had got the numbers horribly wrong. 
 
The BJP won 282 seats, not 283. NDA bagged 336, not 337, UPA got 60 and others got 147. The Facebook post was later removed. 
 
Tech-savvy Modi often greets his counterparts and other important personalities on their birthdays on Twitter. 
 
In one tweet, he erroneously wished Afghanistan President Ashraf Ghani three months in advance.
 
"Happy birthday ashrafghani. Praying for your long life and exceptional health and a joyful journey ahead," Modi said on February 12.
 
Ghani, making light of the situation, replied: "Greetings from Munich, Mr. PM. Although, my birthday is on 19th May, I'd still like to thank you for your gracious words:)"
 
West Bengal Chief Minister Mamata Banerjee too committed a faux pas as she did not seem to remember that the legendary Ghazal singer Jagjit Singh had passed away in 2011.
 
"Birthday greetings to Jagjit Singh, Zakir Hussain, Md Azharuddin. And if it is also your birthday today, let me wish you too," Banerjee posted last month.
 
Realizing the error, she deleted the tweet and replaced it with: "Birthday greetings Zakir Hussain, Md Azharuddin. Birthday remembrance Jagjit Singh. And if it is also your birthday today, let me wish u too."
 
Union Minister M. Venkaiah Naidu slipped while praising the longest serving Bishop in India, Philipose Mar Chrysostom. 
 
"At age 98, he still inspires with his 'diabolical' methods of sermons. His life and message denote many meaning in life...." Naidu wrote.
 
Among the dictionary meanings of diabolical is "characteristic of the devil, or so evil as to recall the devil". The tweet was deleted. Naidu later said he was honoured to received the Bishop at his residence.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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