SEBI’s Role in the Protection of Investor’s Rights

Investors are the backbone of any financial market. Their trust and confidence are crucial for the smooth functioning and growth of the market. However, investing in the stock market involves risks, and it is essential to have robust mechanisms in place to safeguard the rights and interests of investors. The Securities and Exchange Board of India (SEBI) protects the rights of investors. It ensures a fair and transparent market environment. In this article, we are going to read about how SEBI’s Role in the Protection?

Who is an Investor?

An Investor is one, it can be a natural or legal person who invests capital in a business or enterprise but is not actively involved in the day-to-day management/affairs of the business. He is a person who invests to earn profit from instruments like stocks, mutual fund bonds, etc.

An investor is an individual, entity, or institution that allocates capital or resources with the expectation of generating a financial return or profit. Investors engage in various investment activities to increase their wealth over time. They invest their funds in different types of assets such as stocks, bonds, mutual funds, real estate, commodities, or businesses in the hope of earning income or capital appreciation.

What is Investor protection?

Investor protection is a broad term that defines measures to protect investors from unfair practices by companies, merchant bankers, depository participants, and other intermediaries.

“Investor Protection”, according to the SEBI Act, 1992, is “interest protection of investors in securities and the promotion of the development and regulation of the securities market and matters connected therewith”.

Role of SEBI in Investor protection

Following are the SEBI’s Role in the Protection of the investor:

• SEBI organises financial support training and reflection workshops for financial support and market members and invites market members to decide on comparable projects. Maintain an updated and remote location to train financial backers. It distributes various warnings through the media.
• Secondly, SEBI makes all items of interest available to the public. SEBI has adopted an inspiration-based management system. In this framework, backers and bidders disclose insights about themselves, their products, the market, and their direction so that the backer can make an informed business choice based on such disclosures. SEBI has supported and screened various entry and exit exposures.
• Third, SEBI ensures that markets have frameworks and practises that make exchanges safe. SEBI has issued various assessments, for example, a screen-based exchange framework, the materialisation of safeguards, and various guidelines to guide delegates. Also, security exchanges, corporate restructuring, etc., to ensure the interests of defenders’ financial backers It also ensures that only authorised persons are allowed to participate in the investigation, that each member has an incentive to agree to the principles recommended, and that the implementers are given commendable discipline.
• Consequently, SEBI encouraged financial sponsors to amend their applications. SEBI has an extensive system in place to encourage the redressal of complaints by financial sponsors against middlemen and registered entities. It applies to organisations and individuals who do not change the application of financial support by sending proposals to them and meeting them. Progress in redressing complaints from financial backers is not good under the law (deliver solutions, redress procedures, calculate directions). It has created a complete brokerage tool for stock trading and a warehouse for disputes targeted by financiers. In securities trading, financial backers have security assets to repay the financial backers when the dealer defaults. The store reimbursed its financial backers for the disaster caused by our warehouse’s negligence.

How SEBI protects Investor’s rights?

Investment activities become enjoyable if the investor knows that SEBI’s Role in the Protection:

To address several of the above, which are illustrative, SEBI guidelines for Investors protection:

Investor education and awareness

To protect the interests of investors in securities and to promote development, to regulate the securities market and matters connected or connected with it, the Central Government (GOI) has established an Investor Education and Protection Fund.

• SEBI conducts workshops to educate and spread awareness about investments.
• SEBI responds to investors’ queries directly through email and letters.
• SEBI also publishes warnings through the media.

A disclosure-based regulatory regime

As part of this, issuers, intermediaries, etc. disclose themselves, the product, and the market, which helps investors make careful decisions.

For these purposes, SEBI has come up with guidelines for regular monitoring and protection of Investors protection.

A disclosure-based regulatory regime

The following are the procedures:

• Screen Trading: Screen trading refers to a facility introduced by NSE which is fully automated nationwide where a member can input the quantity of security and the price at which he would like to trade into the computer and the transaction is executed as soon as a matching order to sell or buy from the party is found.
• Dematerialization of securities: Dematerialization is the process of converting the physical form of Certificates or documents into electronic form.
• Introduction of T+2 rolling settlement: For years there was a weekly settlement (i.e. every Tuesday) conducted by NSE. Which fell to T+3. There is now a T+2 settlement (T stands for the day of the transaction and the numbers stand for days after the date of the transaction). A thorough screening of intermediaries is carried out to ensure that only a suitable and proper person/agency can operate in the market.

Redressal of Investor Grievances

An investor may have complaints about companies or intermediaries. The investor can address his complaints to the concerned company or intermediary. If the complaints are not redressed or are unsatisfactory, the investor can approach SEBI.

SEBI is going after companies or intermediaries that have failed to respond to complaints. To facilitate responses to various queries of the general public regarding securities market-related matters, SEBI has launched a new initiative and launched a toll-free helpline number 1800 266 7575 or 1800 22 7575.

SCORES (SEBI Grievance Redressal System)

Let us have a look at the pointers to know about SCORES-

• SCORES is website enabled and provides 24 x 7 online access. Set up by SEBI.
• SCORES enables investors to file and track their complaints and track the status of such complaints online from the above website.
• An email confirming the registered complaint with a unique number is generated.
• This is forwarded to the affected entity for correction.
• The entity uploads a report on the actions taken.
• SEBI continues to report on actions taken.
• Every complaint has an audit and a trail.
• The complaints are stored in a central database. It generates relevant MIS reports for SEBI to take policy decisions and remedial action appropriately.

Investors Protection Fund

SEBI has provided relief to its investors by providing a claim against the sole claim of the investor which is given below:

• The amount of compensation available against an individual claim of a non-defaulting investor has been increased to INR 1 Lakh in the case of major exchanges.
• In the case of smaller exchanges, the amount of compensation provided is INR 25,000 viz. Gauhati, Bhubaneshwar, Magadh, and Madhya Pradesh.
• In the case of other stocks, the amount of compensation provided is INR 50,000.

Conclusion

In this article we have seen that SEBI’s Role in the Protection Investor protection is one of the most relevant topics in the financial and securities markets. SEBI should provide proper guidance and guidelines for the safety of the investors investing in the stock market so that their hard earned money is not wasted.

SEBI says “an informed investor is a safe investor” to protect the rights of the investors. It throws light on every aspect of investor interest. This initiative of SEBI and various other investor awareness programs conducted by SEBI have undoubtedly helped investors to transact in a transparent manner.