Investor associations have expressed their unhappiness over the functioning of market regulator Securities and Exchange Board of India (Sebi) in key areas, such as the increasing menace of illegal collective investment schemes.
In a meeting of investor associations convened by the regulator last week and presided by Chairman UK Sinha, associations raised the issue of collective investment schemes, running amok in various forms across the country. Midas Touch Investors Association took up the matter of the Stock Guru scam.
“The media had reported about stockguruindia.com as early as December 2010. Since Stock Guru was offering advice and services relating to the securities market, Sebi should have acted on these reports and representations. It was obligatory upon Sebi to take action to nip the problem in the bud,” Virendra Jain, president, Midas Touch Investors Association said. In October, the Delhi police nabbed Ulhas Khaire and Raksha Urs, a couple who had allegedly duped investors of Rs 500 crore.
Representatives also questioned whether Sebi had any mechanism in place to identify such cheating and take timely or preventive action. Though Sebi officials did not comment on specific instances, they are said to have assured the associations that they have taken appropriate action in several instances.
Sebi officials also explained to the investor associations about the difficulties faced by the regulator in the lower level courts, especially in West Bengal, while taking steps against some illegal schemes in that state.
“Sebi takes some action in some random cases and goes to town about these. But there is no structure in place within Sebi to take preventive action and deal with such cases on a regular basis,” Jain pointed out.
A couple of representatives even complained about the casual manner in which the meeting was conducted. Mala Banerjee of the Federation of Consumer Associations of West Bengal took strong exception to the fact that the chairman said he wanted to leave the meeting early. She also questioned the seriousness with which the exercise was conducted.
According to the representatives, in the past, meetings of investor associations often were whole-day affairs and Sebi chiefs usually were present for the entire duration. The associations felt since there is a huge gap in stature and powers between the Sebi chairman and the rest of the officials, the meeting might not produce desired results in his absence.
The representative of a Mumbai-based association said, “People desire that the person who is at the helm attends to the issues. There is a feeling that the seriousness may be lost at the lower rungs. Sinha stayed for a long time. The whole-time members remained till the end.”
The Mumbai-based representative said the meeting also discussed issues such as arbitration mechanism, complaint redressal, provisions of the new Companies Bill and penalty structures in Sebi.
