FUNDAMENTALS OF INVESTMENT Structure of SEBI
Rights and duties of investors
MODULE-V (Investor Protection)
Stock exchange
Stock exchange is an exchange where stock brokers and traders can buy
and sell securities.
SEBI
The securities and exchange board of India is the regulatory body for
securities and commodity market in India. It was established in 12-
April-1988.
Functions and responsibilities of SEBI
 Protective functions
 Prohibit insider trading.
 Monitor price rigging.
 Promoting ethical business practices.
 Provider of financial education.
 Regulatory functions
 Investigating and auditing stock exchanges.
 Oversee the activities of stock brokers and merchant brokers.
 Promoting fair practices and code of conduct in security markets.
 Governing the procedure of company’s take over.
 Developmental functions
 Training of intermediaries of the security market.
 Conducting research and publish information to market participants.
 Undertaking measures to develop capital market.
Powers of SEBI
 To regulate and approve by-laws of stock exchanges.
 To inspect the books of financial intermediaries.
 To handle the registration of brokers.
 To compel certain companies to get listed.
 To inspect books of accounts of recognized stock exchanges.
 To call for periodical returns.
 Delay or default in delivery of purchased security to the client.
 One chairman of board appointed by central government of India.
 One board member appointed by central bank.(RBI)
 Two board member hailing from the union ministry of finance.
 Five board members elected by central government of India.
Investor protection
Investor protection means various measures established to protect the
interest of the investors from malpractices.
Role of SEBI in investor protection
 Facilitate redressal of investor grievances.
 Build capacity of investors through education and awareness.
 SEBI distributes different sorts of alerts through media.
 SEBI conduct regional seminars.
 SEBI facilitate screen based trading system.
 SEBI facilitate dematerialization of securities.
Investor awareness measures initiatives of SEBI
1. Financial education programs
2. Visit to SEBI programs
3. Regional seminars
4. Investor awareness programs through investor associations
5. Investor awareness programs through security market trainers
6. Investor awareness programs through commodity derivative trainers
Investor protection- Usual grievances of investors
 Usual grievances against company
 Delay in registering transfer of securities.
 Delay in payment of dividend.
 Delay in repayment of public deposit.
 Non-receipt of right issue offer.
 Non-receipt of duplicate share certificate.
 Transmission o shares.
 Usual grievances against brokers
 Delay or default in payment of securities told.
 Non-issue of contract note.
 Charging excess brokerage from clients.
 Overcharging.
 Usual grievances against depositories
Depository participant is an institution which act as an agent to hold
securities either in certificated or uncertificated form, dematerialization
of securities etc. of the holder. DP must forward all the materialization
or dematerialization request request of his client to concerned
company within 7 days of the receipt of request.
Methods of redressal of investor grievances
1. Grievance cells in stock exchanges
2. SEBI
3. Company law board
4. Courts
5. Press
Investors protection fund (IPF)
Investors protection fund is the fund set up by stock exchanges to meet
the legitimate investment claims of the clients of the defaulting
members that are not of speculative nature.
SEBI Online Complaint Redressal System (SCORES)
SEBI launched a centralized web based complaints redress system
SCORES in June 2011. It is an online platform designed to help investors
to lodge their complaints, pertaining to security market, online with
SEBI against listed companies and SEBI registered intermediaries.
Insider trading
Insider trading is a practice of using confidential information of a
company to trade in the company’s securities.
Unpublished Price Sensitive Information (UPSI)
It means any information which relates directly or indirectly to a
company and which if published is likely to materially affect the price of
securities of the company.
 Rights of investors
 Right to get unique client code allotted.
 Right to get copy of KYC and other documents executed.
 Right to get order of trading shares executed in unique client code.
 Right to get best prices.
 Right to get details of charges levied.
 Right to receive funds and securities on time.
 Right to ask for settlement of accounts.
 Right to receive statement of accounts from trading members.
 Duties/ Obligations of investors
 Duty to possess a valid contract or purchase or sales note.
 Duty to deliver securities with valid documents.
 Duty to understand right given to members.
 Duty to read risk disclosure documents.
 Duty to verify details of traders.
 Duty to review contract notes and statement of accounts.
 Duty to take up complaints within a reasonable time.
 Duty to participate in dispute resolution meetings.
Investor activism
An activist investor is an individual or group that invests in a company
and or obtain seats on the board to effect a major change in the
company.
Types of activist investors
1. Individual activist investors
2. Private equity firms
3. Hedge funds
Prepared by:
JUBAIR MAJEED
RAHUL MURALI
9947050644 / 8089778065 (WhatsApp only)