Investors’ Education And Grievances

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Written By RobertMaxfield

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A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

— Mark Twain (1835 – 1910)

We learnt calculus, organic chemistry, mathematics and Shakespeare in college, but investing in the stock markets arguably a subject of interest for scores, never formed part of our curriculum. A subject that would have shaped the monetary destinies of each of us was never even considered.

Educated & empowered investors always allow the market forces to play their role to shape a fairer and efficient competitive market. In the past, the investors, small and ignorant, have had very unpleasant experiences in the stock market. Through the years, it is experienced that the worst sufferers in the market are the small investors who have little awareness about the changing market scenario.

With the increasing role of globalization & liberalization in the world, the concept of investor protection has to be looked at from different angles taking into account the requirements of various kinds of investors i.e.,(i) investors in equity (ii) large institutional investors (iii) Foreign Investors (iv) investors in debentures and (v) small investors/deposit holders etc. The Indian stock market should keep itself in touch with what is happening in the world.

Foreign Institutional Investors are becoming major participants in the Indian Stock Markets. They have a global investment perspective and independent country market evaluating criteria. To generate faith Indian markets have to become more transparent, more informative and encourage greater participation from the institutions and the individuals. Better-educated and empowered investors play their role in stabilizing the market which itself generates faith among the investors who are looking forward for better investment opportunities. These investors strongly influence the national economy.


A potential investor invests in the stock market with certain expectations about the performance of the company, the prospects of income from and/or the capital growth of the security and the corporate benefits that may accrue. While making a decision, the investor evaluates the attendant risks, especially as the expectations on income and/or growth may not materialize. An investor in debt instruments has recourse to redeem the investments from the company besides the market. But as an equity shareholder, the investor can realize value only through the market. Further, there are risks in the trading and transfer of securities.

What is important for the investors is that they should be able to identify industries that are growing at a faster rate. This requires constant analysis and expertise to analyze the financial indicators. The financial services sector would gain momentum and the services of the financial analysts will increasingly play an important role in view of the rapid changes in the new economy.
Jai Singh Kothari, Financial Analyst & Director, Rajasthan Patrika Ltd., in his keynote address, emphasized the need of investor education in the fast changing scenario of the capital market. He said successful investors will be those who identify and follow the winners in the new economy.
Kothari pointed out that in this era of globalization, the Indian economy is being transformed from an agro base to industry orientation. Therefore, it is advisable to first understand the fundamental principles before one gets into the capital market. Increasingly, knowledge based industries will play a significant role in the new economy. He said agro based economy had the elements of stability while liberalization and globalization based economy will have the elements of instability and, under such circumstances, success can be ensured only when one can identify stability factors in the unstable economy.

He cited the example of the United States of America where during the nineteenth century 98 percent of the population was dependent on agriculture. This figure was gradually reduced to 60 percent due to industrialization of the economy in the next century. By 1950, the agricultural component in the economy was reduced to 45 percent. Presently it is just 2 percent. This means 98 percent of the economy is dependent upon service and technology based sectors.
Kothari explained that the present Indian economic situation is same as the American economic situation in the nineteenth century. Within a span of a decade, the percentage of agriculture sector reduced from 70 to 65 percent in the year 2000. By 2007, this figure is going to be 55 percent.


It has been observed that several licensed non-banking financial institutions and plantation companies are not making repayment of the maturity value of fixed deposits under their different deposit schemes, to their depositors in clear violation of their contractual obligations and trust, on one or the other pretext. It is a strong need that the government should take prompt and effective steps to catch hold of defaulter companies and make repay depositors’ dues without any further harassment. In case of deliberate defaults, directors’ property should be attached.

It was felt that the capital market included investment into risk bearing instruments. In such cases, the investor was required to make his own assessment of risk and reward. No compensation could be visualized for such investors whose investments were in risk bearing instruments. Similarly, investment in a fixed return instrument necessitated a careful review of the borrowing entity. Such actions would also be subjected to known or declared risks. Besides, the capital market also provides an opportunity for an investor to exit. The need therefore, is to ensure proper and healthy market operation so that investors could exercise their exit options in a reasonable and equitable environment.

In particular, the capital market regulator, SEBI has a significant role to play in safeguarding the interest of investors. Therefore, it is the joint responsibility of SEBI, the stock exchanges, the government and the non-government organizations to equip small investors with the necessary information and understanding about the intricacies of the functioning of the stock markets so that they can ensure guaranteed & safe investment avenues.


SEBI has done a commendable job in developing the framework for Indian capital market in its formative stages subsequent to the liberalization process initiated in the 1990s. SEBI has instituted a committee to discuss the policy and modalities of an investor education programme that will bring about investor awareness with the help of the media. SEBI has sanctioned a grant for establishing two Investor Education & Grievances Cell at Jaipur and Calcutta, and also for organizing seminars on Investors’ Education on capital markets in various cities of Rajasthan and West Bengal. Recently, it conducted seminars in Jaipur & Calcutta and many other places on ‘Investor Education on Capital Markets’ log on to a Web site called

Minister of Company Affairs, Shri Prem Chand Gupta launched the “Investor Helpline”, a website developed by Midas Touch Investors Association, here today. The website is fully funded under Investor Education and Protection Fund (IEPF), Ministry of Company Affairs. Investors having grievances against various companies that have collected money from the public can refer to the website. Consumer Unity & Trust Society (CUTS) is a leading consumer organization established in 1983 in India engaged in several areas of public interest, in the fields of consumer movement, health, environment, and investor education, economical and social reforms. CUTS is registered under Investor’s Association with SEBI.


SEBI has instituted a process for redressing investor grievances arising from the issue procedure, from investor dealings with brokers and sub-brokers and against mutual funds. The largest number of investor grievances is caused as part of the issue process.
The grievance redressal rate of SEBI has been increasing through the years as can be seen from Table 1and Table 2 The reasons for the improvement in the rate of investor grievance redressal in the current year are effective follow up with the companies, tightening of the procedure for issuing No Objection Certificate for release of the 1% security deposits kept by the companies with the stock exchanges and periodic meetings held with the recalcitrant companies. The grievances received during the year 1996-97 were substantially lower than those received in the earlier years. It can be observed from Table 2 that the redressal rate has been consistently increasing over the years

Table 1. Investor Grievances

	       Received         Resolved 

upto 1991     18,794           4,061

1991-92       110,317          22,946

1992-93       3,51,837         66,308

1993-94       5,84,622         3,39,517

1994-95       5,16,080         3,51,842   

1995-96       3,76,478         3,15,652

1996-97       2,17,394         4,31,865

Table 2. Investor Grievances – Cumulative

                      Received 	        Resolved    	Redressal Rate 

Upto 31.03.91        18,794             4,061               21.61%

Upto 31.03.92        129,111            27,007              20.92%

Upto 31.03.93        480,948            93,315              19.40%

Upto 31.03.94        1,065,610          432,832             40.62%

Upto 31.03.95        1,589,690          784,674             49.61%  

Upto 31.03.96        1,958,168          1,100,326           56.19%

Upto 31.03.97        2,175,562	         1,532,191           70.43%


However, there is a need for the framework to develop further in a balanced manner keeping in view the Indian context while enabling best international practices. In doing so, the regulator must examine different aspects of capital market operation and the roles played by different intermediaries as also the interaction amongst them so that the capital market is able to deliver finance to meet requirements of the corporate sector promptly, in a cost effective manner and in keeping with the changing requirements of new business models. In carrying out this function, it should ensure the credibility of its processes in the eyes of the investors.

General Do’s and Don’t’s for Investors

1.Deal with registered intermediaries. Keep a record of all instructions and transactions.

2.Confirm with your Broker / Sub-broker whether delivery is in physical or demat form before selling shares.

3.Don’t fall prey to promises of impracticable high returns.

4.Don’t indulge in speculative trading. Operate within your predestined limits.

5.Use the Investors’ Grievance Redressal system of the Exchanges to redress your grievances if any.

6.Have knowledge of the working of the Investor Service Cell for complaint against listed companies/Brokers.

7.Go for Online trading by registering with a Broker.