It is explicit that the enactments like Companies Act, 1956, Securities Contracts (Regulation) Act, 1956 and SEBI Act, 1992 contain provisions to protect the interests of investors. However, they have not served the purpose fully. Hence, the investors must be aware of the other measures available for their protection.
It is a known fact that, the capital market in India has grown manifold in the last five to seven years. However, when compared to the western countries, it is still in its infant stage. The experts in the capital market predict a faster growth of the market coupled with a substantial increase in the number of investors. The investors’ grievances must be redressed and they should be assured of prompt, efficient and reliable services to protect their interests.
On their part, the companies too have taken the investors’ problem seriously so much so that they have changed their earlier stand of having a centralized department for investors’ problems in favour of giving the whole portfolio to outside specialized agencies as transfer agents. There is a growing awareness now that the handling of investors’ problems is a specialized subject and if they fail to deliver efficient services, their chances to mobilize fresh resources by way of public rights issue may be jeopardized and eventually losing sympathy of investors.
The Government of India, also appreciating the fact that good investors’ service is one of the important factors for a sound and healthy capital market, has started a service dialogue on this issue and has given powers to Securities and Exchange Board of India (SEBI) and stock exchanges for speedy redressals. In fact, both SEBI and stock exchanges have successfully launched a separate department for this kind of work. They have started publishing names of companies which have largest number of investors’ complaints and insist on solving the investors’ problems with speed. A beginning made in this field in the last two or three years is now gaining momentum.
INVESTORS’ SERVICE CENTRE
Companies with lakhs of shareholders / debentureholders have opened permanent investors’ service centres for attending to problems like change of address, non-receipt of refunds, interest or dividend warrants, non-receipt of certificates after transfer and revalidation of warrants. They also accept lodgements for transfer of shares / debentures and accordingly accept such applications, make on the spot endorsements for fully paid certificates and liaise with the company’s secretarial department to ensure faster solution to problems, however, small.
With these innovations, the work load of post offices and couriers has been considerably reduced. The investors and companies are a happy lot now. They have comparatively lower pendency of problems. The executives’ time consumed in scrutinizing transfer forms has been minimised now as they are to check only the specimen signature and prepare a list of transfers for the Board meeting. With communication facilities improving, time is not far when all formalities relating to the transfer would be completed locally, and the local centre would send only the final list of transfer application for the Board to discuss and resolve. Such service centre in India where illiteracy level is high, help in narrowing the communication gaps as also overcoming linguistic barriers. Companies headquartered in Delhi may have a shareholder from a very remote village in Kerala State who may not be good at writing complaint in Hindi*. This sometimes becomes a major impediment in prompt redressal of grievances. The Reliance Industries Limited is one company which has opened such centres at many places in the country which have fared well. Opening of temporary investors’ service centres for taking care of sudden increase in problems (especially after the closure of mega issues and their allotment) is also helpful, for instance, due to sudden spurt in the problems, it helps better understanding and faster solution of complaints. The Oswal Agro group is a company which had, at the time of mega-issue of Bindal Agro Chem. Ltd., opened such centres. Similarly, ICICI and Tata Timken Ltd., have also extended such facilities, although for a very short period, and for a very limited purpose of public issue complaints.
LODGEMENT CENTRES FOR RIGHTS ISSUE
The application forms of rights issue which, hitherto were being accepted by banks are (in some cases) now being accepted at the predesignated company’s service centre. In a few cases, the companies have decided to handle the acceptance of rights application form themselves. The bank’s job would then be reduced to clearing of cheques and maintaining the collection account in terms of funds. This procedure ensures a perfect and better investors’ assistance at the time of filling up the form, fewer rejections of forms, speedy clearing of cheques, faster remittances of funds and immediate allotment on closure of the issue. Earlier, the banks used to take longer time in processing the forms and thus the procedure of finalizing the allotment entailed undue delay. Rights issues generally remain open for a month and the forms are relatively lesser than public issues. As a consequence of this, the banks were taking their own time to finalise the processing before arriving at the final collection figure. This system was followed by TELCO, Deepak Nitrate, Procter and Gamble, Ashok Leyland, Ranbaxy, Nicholas Lab., ESAB India, Indian Organic and so forth. The indicators for future events are that the companies may resort to such arrangements in relation to collection of allotment and call money and may also consider lodgement of public issue forms at private investors’ service centres. This would, however, require clear cut legislation.
The question is, can a private service centre provide as good or as strong an infrastructure as a bank can? The bankers have the advantage to pool a large contingent of staff when suddenly required, it would have the necessary space also and generally speaking it can cope with a large volume of work. The private service centre may initially face problems in building up the requisite infrastructure.
LODGEMENT OF DEBENTURE CERTIFICATES OF REDEMPTION
This is smaller to lodgements to -back. The debentureholders are requested to lodge certificates along with advance stamped receipt at the predesignated centres throughout the country. The holders are then sent redemption amount by pay orders. This avoids inconvenience for the investors, ensures proper filling up of form and saves postal authorities of work.
SPECIFIC CENTRE FOR ON THE SPOT ENDORSEMENT FOR CALL MONEY PAID
A few companies have started giving on the spot endorsement (as fully paid) facility at local service centres. This process hardly takes a few minutes. It facilitates the investors in transacting on the share certificates which he is holding, thereby saving the agency of waiting for a month after sending them to the company for the endorsements.
It is time for the Government to insist on companies with very large shareholders base to open full time permanent service centres, not only in four metros in India but also at all places where stock exchanges function. One of the objectives of granting legislation to SEBI was to inspire confidence in investors and protecting their interests. The recent guidelines and code of conduct also require the stock exchange members to modernise investment services, introduce better and innovative practices in the interest of investors. In this context, it is apt to mention the SEBI’s achievement for the redressal of investors’ grievances.
REDRESSAL OF INVESTORS’ GRIEVANCES BY SEBI
In an effort to improve the quality of intermediary services available to investors, procedures have been instituted for redressal of investors’ grievances arising from the issue procedure and those related to brokers. The table given below gives the details of investors’ grievances that have been received by SEBI since its inception and their redressal rate. Constant follow up and deterrent actions have helped in redressing an increasing proportion of investors’ grievances. The large number of complaints received clearly indicates the inadequacies of the existing systems and practices in Indian securities markets. These grievances are also a reflection of the rising expectations of investors from intermediaries in the securities markets. The intermediaries in the primary and secondary markets such as brokers, sub-brokers, underwriters and merchant bankers, bankers to the issue, share transfer agents, and registrars to the issue are required to be registered with SEBI. The increasing number of investors’ grievances indicates that investors’ satisfaction and investors’ confidence area set to become central issues in the development of securities market in India.
It is essential from the point of view of promoting investors’ confidence in their investment to create a sound investment climate which needs redressing the grievances of the investors. In this regard, the services rendered by SEBI to redress the grievances of investors’ are worth to mention. However, in view of growing capital market activities, besides SEBI, investors’ service centres in private sector should also come out in large number to redress the grievances of investing community.
Dr.R.SRINIVASAN is a Post graduate in commerce and corporate secretary ship . He received his doctoral degreein the Managementfaculty from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi He has delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. He has supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades. Article Source:
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