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SEBI's disclosures and investor protection guidelines explained!
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Do you feel safe investing in the stock markets in India? Do you trust the legal system to protect you against malpractices? Do you know the legislations and the government or other bodies that act as watchdogs for investors? Have you heard of Disclosure and Investor Protection guidelines? If not, read on.
How do we protect ourselves from fraud? The best way to exercise control over your investments is to have complete knowledge about the stocks in which you invest. This is where transparency and accurate information from the corporate world is desired to enable investors to make informed decisions. Disclosures and Investor Protection guidelines are tools that empower investors with information and also protect them from cases of mismanagement like insider trading.
Role of Securities and Exchange Board of India
The primary functions of the Securities and Exchange Board of India (SEBI) are to protect the interests of investors in the security markets in India and to regulate the securities market to ensure its orderly operation. With this objective, SEBI issued the SEBI (Disclosure and Investor Protection) Guidelines, 2000. SEBI uses these guidelines as a yardstick to ensure that investor interests are protected. The Disclosure and Investor Protection guidelines apply to the primary market, i.e., public issues made by listed and unlisted companies, rights issues, and offers for sale by listed companies in certain cases.
SEBI (Disclosure and Investor Protection) Guidelines:
These guidelines include instructions for eligibility standards for companies issuing securities, pricing of securities to be issued by companies, requirements relating to promoter contribution, and lock-in period for securities and more. The guidelines also describe the information that should be included in offer documents to the public, like a prospectus, abridged prospectus, and letter of offer.
How does SEBI ensure that the guidelines are complied with?
The Merchant Bankers are responsible for ensuring that all the requirements of Disclosure and Investor Protection Guidelines are complied with at the time of submitting the draft offers documents to SEBI. SEBI on its part evaluates if the guidelines are being followed and all required disclosures are made in the offer documents.
Do you think the Securities and Exchange Board of India has been able to fulfill its objectives? Do you have any advice for other NRI investors?
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