Sucheta Dalal :Investors Protection: What investors want
Sucheta Dalal

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Investors Protection: What investors want  

October 2, 2012

And why the regulator doesn’t understand it

Sucheta Dalal

A change of guard at the finance ministry has renewed efforts to lure investors back to the market through tax concessions and more financial literacy. There has been a corresponding spurt in stock prices following massive money being pumped in ostensibly by foreign institutional investors (FIIs). Has it really changed the investor sentiment? The short answer is, no. Nothing that the government is doing makes a difference to small investors because the focus is not on making the market safer for them. In fact, the regulator is not even listening. Here is a quick roundup on why things are as bleak as ever. The two bugbears for investors are mis-selling of financial products and poor grievance redress.

On the latter, we find that SEBI is doing quite well with its toll-free helpline. Calls to the helpline (1800-22-7575) to seek information on capital market products are answered quickly and competently. However, when it comes to complaints against companies and market intermediaries, SEBI continues to operate like a post-office, merely forwarding complaints after assigning a number. Worse, complaints are unilaterally closed based on responses from companies and intermediaries with a terse information letter to the investor without giving them a chance to respond.

It should learn from the way National Consumer Disputes Redressal Commission (NCDRC) operates. NCDRC always operates to the benefit of ordinary consumers. Indeed, if the case is overwhelmingly in favour of consumers, it issues ex-parte orders, thereby sparing consumers the bother and expense of a visit to Delhi. In contrast, neither SEBI nor the stock exchanges, which are the first-line regulators, show such empathy. Instead, they try to push retail investors into arbitration, where they are clearly at a huge disadvantage in terms of knowledge of rules, processes and the funds to get competent representation. If the government is serious about bringing investors back to the market, this is what it needs to tackle on a war footing, instead of spending crores of rupees on pointless advertising and seminars on financial literacy.

-- Sucheta Dalal