SEBI Guidelines for protecting interest of investors

The main object of SEBI is not only to regulate stock markets but also to protect the interest of investors. For this purpose, SEBI has given following guidelines:

SEBI Guidelines for protecting interest of investorsBefore you proceed with the guidelines of SEBI towards protecting investors interest, you may also would like to read SEBI Guidelines in issue of Fresh capital Share, Guidelines on Primary markets and secondary markets

  1. SEBI has been encouraging investor-education. For this purpose, certain investors’ associations have been registered.
  2. Companies raising public deposits as well as huge capital must undergo credit rating. Credit rating by an authorized authority gives a fair view about the financial strength of the organization. For this purpose, there are four credit rating agencies. They are:
    • CRISIL
    • ICRA
    • CARE and
    • Duff and Phelps Credit Rating India Pvt. Ltd.
  3. SEBI has taken the responsibility of disclosing fair and adequate information for investors for the purpose of investment decisions.
  4. For the benefit of the investors, company has to disclose its capacity utilization, adverse events and material changes of key personnel.
  5. Disclosure on market prices for listed company.
  6. Arrangement for disclosing investors grievances and redressal system.
  7. Compulsory disclosure in the prospectus.
  8. Contribution by promoters whose name figure in the prospectus.
  9. In case of over subscription of any company issue, SEBI representatives will be present there to look into the allotment process.
  10. Setting up of investors grievances cell for handling complaints of investors.
  11. SEBI has right to cancel registration of any underwriter who fails to furnish business details to SEBI.
  12. SEBI has made it mandatory for Merchant bankers to attach diligence certificate with the prospectus for extending their accountability to the investors. The diligence certificate gives a detailed position of the issue of shares. Only by such a certificate, the investor can file a case of incorrect statement in the prospectus on erring companies.
  13. There is an advertisement code by SEBI which has to be followed by companies or investors.
  14. To avoid any malpractice in allotment process, SEBI has appointed its representatives to look into allotment process which boosts the confidence of individual investors.
  15. Underwriters, registrar to issue and share transfer agent and portfolio managers have been brought under SEBI for the first time.
  16. Even the mutual funds have been brought under SEBI and they have to disclose NPV (Net present value) of units every day which benefits investors.
  17. For the benefit of the individual investors, a new scheme called stock invest account has been introduced in banks. From this stock invest account, the new issue of shares will be applied. In that, the investor will intimate the stock invest account to the company issuing the shares.
  18. In case of allotment, the company will inform the banker as per SEBI guidelines, and funds will be released from the stock invest account to the bank.