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SEBI's Role in Investor Protection Issues

This document discusses several changes made by SEBI regarding investor protection and the Indian capital markets. It summarizes that SEBI facilitated the establishment of the National Stock Exchange and depositories, regulated financial intermediaries, and brought healthier practices. However, it argues that some changes favored large institutional investors over retail investors, including qualified institutional buyer rules and free pricing of IPOs, and increased manipulation risks. The document also discusses reforms to financial reporting, insider trading penalties, growth of derivatives trading, and challenges with rating IPOs of equity shares.

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56 views11 pages

SEBI's Role in Investor Protection Issues

This document discusses several changes made by SEBI regarding investor protection and the Indian capital markets. It summarizes that SEBI facilitated the establishment of the National Stock Exchange and depositories, regulated financial intermediaries, and brought healthier practices. However, it argues that some changes favored large institutional investors over retail investors, including qualified institutional buyer rules and free pricing of IPOs, and increased manipulation risks. The document also discusses reforms to financial reporting, insider trading penalties, growth of derivatives trading, and challenges with rating IPOs of equity shares.

Uploaded by

amitsingla19
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd

SEBI and Investor Protection

The Road Taken


Facilitating Establishment of NSE
Removing Area Restriction for Membership
Facilitating Establishment of Depositories
Credit Rating Agencies
Registration and Regulation of Financial

Intermediaries
Bringing in Healthy Practices in Capital
Market

Qualified Institutional Buyers


Against the Interest of Retail Investors
Prevents wider holding
Facilitates Manipulation
Prevents Perfection of Capital Markets
Favouritism Shown to QIBs
Increases the QIB and Merchant Banker

Nexus

IPOs and Adequate Disclosure


High Quantity of Information
Vetting the Prospectus Difficult
Onus Shifted to Merchant Banker
Prospectus Became Bulky
Application Cum Prospectus
Prospectus Portion Unreadable

Free Pricing of IPOs


Hefty Premium
Players with Grip on the Market Exploit it
QIBs Withdraw at the Last Minute
No longer IPOs are Sure Winners
Need for Merchant Banker to Maintain

Price
Listing at a Discount to Issue Price

Financial Reporting
Bulky Annual Reports Quarterly Revenue
Guidance
A Shareholder Having
a Single Share entitled Annual Revenue

to the Report
Quarterly Reporting
without Audit
Quarterly Reporting
with Limited Audit
Review

Guidance
Finally, Corporates
Need not Send the
Annual Report
Need to Send only on
Request

Insider Trading
Lesser Cases of Detection
Disproportionate Quantum of Punishment
Penalty and Denial of Access to capital

Market
SEBIs Orders Reversed by SAT

Derivatives
More Retail Participation
Dominant Futures Market
Insignificant Cash Market
Short-Term Perspective
Neither Hedging nor Risk Management
Pure Speculation

Rating of IPOs of Equity


Shares
Difficulty of Equity Valuation
Hence, Not Done Anywhere
Over-Enthusiasm
Misleading the Investors
More Shopping Efforts for Rating by

Corporates

The financial markets that we have


constructed are now so complex, and the
speed of transactions so fast, that
apparently isolated actions and even
minor events can have catastrophic
consequences
-Richard Bookstabar in
A Demon of our Own Design

THANK YOU

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