Street Food: Of investor and for investor, but by who?

Everyone in the market pays homage to investors, especially small ones. The regulator, the government, the institutions, and the intermediaries: Nobody's an exception. But, two developments over the last few weeks makes one wonder if such homage is serious. The first relates to the sins of the past. The second is about the future.

The Securities and Exchange Board of India (Sebi) has vowed to bring down the number of listed companies by weeding non-functional and non-compliant ones. To ensure shareholders in these companies are not further inconvenienced (they have already suffered without exit for years due to suspension policy followed by exchanges), Sebi said promoters would be penalised and would be made to give exit offers at fair value for public shareholders.

The process of compulsory delisting was announced. But, it emerged that in nearly 90 per cent of the companies on the list, the exchange did not have name and address of the promoter.

While the notice claimed to have sourced details it had from depositories, registrars of companies, etc, a check on the ministry of corporate affairs site showed several companies, for which the exchange did not have details, were alive and were filing returns regularly. If such is the diligence deployed by the people concerned in identifying the promoters, whose numbers are in hundreds, how would one find shareholders, who could be in thousands?

The second issue is about the manner in which Sebi's discussion papers are dealt with. Sebi takes the views of all stakeholders by way of comments on the papers. But, it appears not much effort goes into getting responses from the wider market.

Often, influential players such as intermediaries and market infrastructure institutions are able to provide views and be heard more than the common investor.

Take the paper on algorithmic trading. Much of the early news reports and commentary that emerged initially were focused on slamming the proposal and did not take into account the views of the smaller guys.

When reached out, many investor association office bearers were not aware of the fundamentals of algorithmic trading. Others did not even know Sebi was taking public views on this subject.

Sebi has registered about two dozen investor associations.

Why can't these be made more accountable and made to participate more in the policy making process?

It is a two-way street. Even the associations have to take active steps to be part of the discourse. They should get in young people who have more energy and ideas to work with the associations.

Sebi has crores of funds in its investor education funds. These funds can be used to build a strong framework of local associations, which can be a good network that enables two-way communication between the regulator and the constituency it serves: The investors.

Sebi has extended its presence beyond metros by opening offices in almost every state across the country. These offices should join hands with local investor associations in help building a vibrant investor community at grassroots level. Inputs from such a network would be invaluable.

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