Introduction

The Joint Stock Company concept emerged in the 19th century, facilitating
investment from the public by issuing shares. Investors exert control
through representatives in board meetings, distinguishing it from
partnership firms. This innovation allowed for limited liability for investors
and separated ownership from management, akin to the railroad engine's
impact on the century.

Need for protection the investors

However, the nature of company management requires establishing some

mechanisms for the protection of the investors. The need for investors
protection arises due to the following reasons:

To instil confidence in the investor’s mind

Investor confidence is crucial for the smooth functioning and success of the
capital market. Loss of confidence can lead to significant disruptions, as
investors may withdraw from the market if their expectations are not met.
Thus, creating a conducive environment through investment protection
measures is paramount to maintaining and building investor confidence.

To create a conducive measure for investment

A robust investment climate is vital for industrial development, facilitating

affordable capital raising for corporate customers. Strong investment
protection measures contribute to creating a secure and conducive
environment, fostering a healthy investment climate.

To ensure transparency in dealing

Investors rely on transparency in company dealings and stock market
intermediaries for securing investments, with investor protection measures
enhancing transparency for informed decision-making.

To create a vibrant capital market

Comprehensive investor protection fosters increased market participation,

driving market development and attracting further investor interest, thereby
promoting a vibrant capital market.

To regulate the market on sound lines

Regulatory investor protection measures ensure adherence to regulations

by all market participants, promoting smooth and stable functioning of the
capital market.

To create discipline in the market

Investor protection measures aim to reduce unhealthy practices and foster

discipline among market players, ensuring integrity and stability in the
market.

To create accountability among market players

Strict disclosure norms and investor protection measures cultivate

accountability among market players, ensuring compliance and
accountability to regulatory bodies.

To create awareness among investors

Investor protection measures prioritize investor education to empower

individuals to safeguard their rights, recognize fraud risks, and mitigate
potential losses, fostering self-protection within the market.
Factors affecting investor’s interest

There are many factors that affect investors’ interest and thereby cause
dissatisfaction among them. The prominent causes are as below:

Price rigging

Price rigging involves artificial manipulation of securities prices by bulls and

bears, undermining market forces and leading to detrimental impacts on
innocent investors.

Insider trading

Insider trading involves individuals exploiting privileged information for

personal gain through buying and selling securities, disadvantaging
uninformed investors.

Excessive speculation

Excessive speculation by brokers, beyond their capacity, can lead to

non-fulfillment of settlement promises, potentially causing market crashes
and harming innocent investors.

Lack of transparency

Companies may attract investors by presenting a misleadingly positive

financial image through accounting manipulation, resulting in opaque
disclosures and lack of transparency in stock market dealings.
Short selling

Short selling involves selling securities one does not own, anticipating
lower future prices, and contributing to market volatility, particularly when
delivery is due.

Restricted trading

Investors often lament restricted trading on stock exchanges, where a

significant portion of turnover is dominated by a small number of top
shares, limiting trading diversity and market participation.

The dominance of few stock exchanges

Despite the existence of numerous stock exchanges in India, trading

primarily occurs on the Bombay Stock Exchange and National Stock
Exchange, leading to the diminishing significance of regional stock
exchanges.

The dominance of institutional and foreign institutional investors

In the Indian capital market, institutional investors, especially foreign ones,

wield significant influence, dictating terms and controlling a substantial
portion of new issues, while individual and household equity ownership is
declining.

Grievances against listed companies

Moreover, the investor’s complaint against listed companies in various

ways. Some of these are as below:
 1. Non receipt of share certificates,
2. Non receipt of refund orders,
3. Non receipt of duplicate securities,
4. Non receipt of certificates after,
5. Non receipt of certificates after splitting,
6. Non receipt of interest on listed debentures etc.
7. Grievances against members of stock exchanges

Investors have many grievances against the members of stock exchanges.

Some of these are given below:

1. Non receipt of delivery of shares,

2. Non receipt of dividend,
3. Non receipt of right shares,
4. Non receipt of bonus shares,
5. Non receipt of sell proceeds,
6. Disputes relating to non-settlement of accounts.

Investor’s protection measures

Many measures have been taken by different agencies. They can be

studied under the following heads:

1. Measures taken by stock exchanges,

2. Measures taken by Company Law Board (Now NCLT),
3. Measures Taken by SEBI,
4. Measures taken by the Court,
5. Measures taken by the Central Government,
6. Measures taken by the Department of Company Affairs.

Measures taken by stock exchanges

1. BSE and NSE have investor service cells addressing grievances against
listed companies and exchange members.
2. Both exchanges established investor protection funds to compensate for
defaults by trading members.
3. BSE introduced a trade guarantee fund to ensure settlement and prevent
defaults, safeguarding investors.
4. Reforms like transparency norms and abolition of Badla system aim to
curb speculation and uphold market integrity.
5. SEBI's regulations combat insider trading, price rigging, and fake shares,
subject to periodic review.

Measures taken by the Company Law Board (Now NCLT)

1. Investors have the right to access company documents through the

Company Law Board, ensuring transparency.
2. The Company Act permits inspection of meeting minutes, with provisions
for the Board or Tribunal to send copies as directed.
3. Central Government may appoint individuals to safeguard shareholder
interests, preventing oppression and mismanagement.
4. The Company Law Board can prevent prejudicial changes to the Board
of Directors, ensuring shareholder and public interests are protected.

Measures taken by SEBI

1. SEBI's detailed guidelines inform investors of their rights and

responsibilities in capital market dealings.
2. SEBI established an investors grievances division at its headquarters.
3. An automated complaint system streamlines handling of investors'
grievances.
4. Stricter disclosure norms for public issues and allowance of abridged
prospectus aim to simplify issuance processes.
5. SEBI mandates a minimum 20% promoter contribution for public issues.
6. Prospectuses must prominently disclose all risk factors for investor
evaluation.
7. SEBI representatives supervise share allotment processes to prevent
malpractices.
8. Brokers are required to disclose transaction prices and brokerage in
issued contract notes.
9. Introduction of dematerialization aims to prevent fraudulent practices in
physical share handling, with separate guidelines for depository services
and intermediaries.

Measures taken by the Court

Regulatory bodies like SEBI, RBI, and DCA offer grievance redressal
mechanisms, with appeals possible to appellate tribunals and ultimately to
the judiciary as a last resort for investor grievances.

Measures taken by the Central Government

The Central Government's Investor Education and Protection Fund

safeguards investors' interests and promotes awareness by utilizing
unclaimed amounts from companies, administered by a trust through
multimedia, publicity, seminars, and conferences.

Measures taken by Department of Corporate affairs

The investor’s interest is protected by MCA in the following ways:

1. One investor grievance officer has been appointed to handle all

complaints from investors.
2. As soon as the complaints are received from investors, they are
acknowledged by giving a specific number for each complaint.
3. The complaint is taken to the company concerned for necessary
adjustments.
4. The status of the complaint is also displayed on the DCA.
Guidelines to investors

1. Ensure dealings occur through registered brokers and sub-brokers to

maintain regulatory compliance.
2. Insist on trading within the exchange's trading ring for transparency and
security.
3. Provide clear instructions for buy or sell orders within fixed price limits or
timeframes.
4. Demand timely issuance of contract notes for registered deals to ensure
accurate record-keeping.
5. Utilize contract notes in case of disputes for easy tracing of transaction
details.
6. Obtain settlement tables from the stock exchange to track payment and
delivery schedules.
7. Maintain separate records for dealings in specified and non-specified
shares.
8. Execute periodic settlements to prevent accumulation of transactional
obligations.
9. Insist on share delivery; in case of objections, notify the broker promptly
for resolution.
10. Ensure shares bought are transferred in your name before company
book closure for entitlement to benefits.
11. Lodge complaints if shares are not delivered by the broker, seeking
alternative avenues for purchase if necessary.
12. Refrain from selling shares not transferred in your name after book
closure to maintain validity.
13. Avoid trading shares held by deceased holders without proper
succession documentation.
14. Anticipate delayed receipt of funds for shares, typically taking seven to
fifteen days, especially with dematerialized transactions.

Conclusion
Investment entails acquiring assets with the anticipation of generating
future income or appreciation, serving as a means to build wealth, with
corresponding regulatory guidelines in place.