Investor Protection

Presented by:
Palzer Chewang Sherpa – 19BC113
Hari Bhatia – 19BC395
 The two broad objectives of SEBI are :-

1) Conducive Environment- SEBI aims at

creating a proper and conducive

Role of SEBI in environment for raising money from

capital market through the

Investor
rules,regulations.

2) Investor Protection and Education-

Protection SEBI aims at protecting investors from

fraudulent practices and educating
investors so as to make them aware of
their rights.
 Issue of Regulations and Guidelines
SEBI issues regulations and guidelines to companies,
mutual funds, portfolio managers, lead managers etc.

Measures Investor Education

taken by SEBI SEBI issues public ineterst advirtisments to enlighten

investors on the basic features of various instruments.

for Investor Grievance Redressal System

The investors make complaints to SEBI in case they face

Protection any problems relating to investments.

Disclosure Requirements by companies

SEBI requires diclosure on various financial aspects of

companies.
 Investor Grievances Redressal
System
In India investment risks are very high due to dishonest practices, frauds and unethical
investment culture. Investors experience a sense of helplessness and insecurity, they
have hardly any confidence in financial markets. Investors are cheated by companies,
by lead managers, by brokers and by everybody, who is capable of cheating them. An
investor may have a complaint against, a listed company or an inter-mediary
registered with SEBI. In the event of such complaint, the investor hould first approach
the concerned company /intermediary against whom there is a complaint.
SEBI Complaint Redress System

SCORES is a web based centralized grievance redress system of SEBI

May 2012, The Securities and Exchange Board of India (SEBI) has ini
ated SCORES, a centralised Web-based system for lodging and tracking
complaints (its website address is http://scores.gov.in). A complaint canbe
filed on SCORES against listed companies and intermediaries registered
with SEBI, such as R&T agents, portfolio managers, depositories and is
participants, debenture trustees, credit rating agencies etc.
 Investor's Awareness

With the advent of technologically advanced financial markets and in the light of
corporate scandals and frauds, it is imperative on the part of investors to be aware about
the general market conditions and environment before investing. An aware investor will
make a right choice and will not come into trap of dubious and Ponzi schemes. Various
institutions, market regulator and stock exchanges have taken the initiative to conduct
investors' awareness programmes some of the key initiatives:-
 Uses platforms like TV, radio, newspapers for inevestor education and
awareness programmes. Also conducts investor awareness programmes
SEBI through Social Media, Resource Person, Investor association, Exchanges
etc.

Creates awareness about the depository process and reassures the investor
NSDL about the safety and benefits of depository system through multiple
channels of communication with investors.

Stock Educates the investors by guiding the investors, specifying do's and don'ts,
Exchanges sending investment alerts etc.

Ministery of Organises Investor Awareness Programmes with the objective of creating

awareness amongst the investor about fraudulent activities and facilitates
Coorporate
informed investment decisions.
Affairs
 Insider trading is defined as using unpublished
price sensitive information to deal in securities of a
company for one's benefit. In November 2014,
SEBI issued new regulations called Securities And

Insider Trading Exchange Board of India Regulations, 2015 for

prohibiting the insider trading. Under these
regulations an "insider" is defined as "any person
who is (1) a connected person, or (2) in possesion
of or having access to unpublished price sensitive
information(UPSI)
 Employees or members of
Members of publicly traded companies are

an in key positions to access Price Corporate employees often share

information that would not Family/Friends information within their own circles that is
organisation otherwise be available to the of employees
not shared with stock market and the
general public general public.

Forms of Insider Trading

Officials of different government

agencies can gain access to
Government confidential information through the
Bankers, lawyers, paralegals,
officials execution of their duties. Theymay
Professionals/ andbrokers ar e but a few of the
conduct insider trading withthis
consultants who have access to
information
Consultants confidential documents of their
corporate clients
 Insider Trading laws around the world
Country Laws Sanctions(civil/criminal)
India SEBI (Prohibition of INR 250 million or three times the amount of profits made out of insidertrading, whichever is higher
Insider Trading)
Regulations, 2015

Australia Australian Act Different penalty for individuals and corporations.- For Individuals - Max. penalty is prison term of 10 years and/or a fine ofup
to A$495,000 or three times the value of the benefits obtained.- For Corporations - Max penalty is the greater of a fine of
A$4,950,000 or 3times the benefit obtained, or 10% of the annual turnover if the benefitobtained cannot be determined

Britain Financial Services & Maximum allowable prison sentence of 7 years or unlimited fine
Markets Act, 2000

Japan Financial ProductsTransaction Act Maximum allowable prison sentence of 3 years.- For individuals fine up to Yen 5 million plus disgorgement of total
tradevalue.- For non-natural persons fine up to Yen 500 million

Singapore Securities and Max. allowable prison sentence of 7 yrs. Fine up to 3 times of profit gained
Futures Act, 2001 or loss avoided with a minimum of SGD 50,000 for persons other than
corporations and SGD 100,000 for corporations

United States Exchange Act, 1934 Maximum allowable prison sentence of 20 years. Fine up to three times ofthe profit made or loss avoided
 Examples of Insider Trading
Martha Stewart & ImClone:
In 2003, Martha Stewart was charged by the SEC with obstruction of justice and securities fraud—including insider
trading—for her part in the 2001 ImClone case. Stewart sold close to 4,000 shares of biopharmaceutical company
ImClone Systems based on information received from Peter Bacanovic, a broker at Merrill Lynch. Bacanovic's tip
came after ImClone Systems chief executive officer (CEO), Samuel Waksal, sold all his shares of the company. This
came around the time ImClone was waiting on the Food and Drug Administration (FDA) for a decision on its cancer
treatment, Erbitux.
Shortly after these sales, the FDA rejected ImClone's drug, causing shares to fall 16% in one day. The early sale by
Stewart saved her a loss of $45,673. However, the sale was made based on a tip she received about Waksal selling his
shares, which was not public information. After a 2004 trial, Stewart was charged with lesser crimes of obstruction of
a proceeding, conspiracy, and making false statements to federal investigators. Stewart served five months in a federal
corrections facility.2
 1) Contribution made by SEBI, grants and donations given to the

SEBI Investor
fund by Central, State Governemnt.

UX 2) Security deposits held by stock exchanges in respect of public

Protection
issues and right issues in the event of de-recognition of such
stock exchanges.
Feature Set

3) Amount in the Investor Protection Fund and Investor Services

and Education
Value Proposition Fund of a stock exchange, in the event of de-recognition of such
stock exchange.
Product-Market Fit

Fund 4) Amounts forfeited for non-fulfillment of obligations specified

in regulation 15B of the SEBI regulations 1998.

Important Provisions regarding 5) Interest or other income received out of any investment made
Target Customer from the fund.
contribution of the fund are:-
6) Amount disgorged under section 12A of the securities
Contracts Act, 1956.
 1) Educational activities including seminars, training, research
and publications, aimed at investors;

SEBI Investor UX
2) Awareness programmes including through media - print,
electronic, aimed at investors;

Protection Feature Set

3) Funding investor education and awareness activities of
Investors' Associations recognized by the Board;

and Education
Value Proposition 4) Aiding investors' associations recognized by the Board to
undertake legal proceedings in the interest of investors in
Product-Market Fit securities that are listed or proposed to be listed;

Fund 5) Expenses on travel of members of the Committee, who are

not officials of the Board, and special invitees to the meetings of
the Committee, in connection with the work of the Committee;
Important Provisions regarding utilisation
Target Customer
of the fund are:-
6) Salary, allowances and other expenses of ottice of
Ombudsman; and Such other purposes as may be specified by
the SEBI.
THANKS!

Palzer Chewang Sherpa – 19BC113

Hari Bhatia – 19BC395