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Investment & Investors Protection


The Investor Protection Act, also known as the Investor Protection Act of 2009, established the Investor Advisory Committee to consult with the SEC. The committee advises on such topics as regulatory priorities and issues that surround new financial products, fee structures and trading strategies. It also provides consultation on initiatives to protect investor interest and to promote investor confidence in the market’s integrity.

The Investor Protection Act is a component of the Wall Street Reform and Consumer Protection Act of 2009 designed to expand the powers of the Securities and Exchange Commission (SEC). The act established a whistleblower reward for reporting financial fraud, increased liability for aiding and abetting and doubled funding to the SEC over a five-year period. The act was part of regulators' attempt to prevent some of the problems that caused the financial crisis of 2008-2009 from reoccurring in the future.

Investor Protection Investors are the pillar of the financial and securities market. They determine the level of activity in the market. They put the money in funds, stocks, etc. to help grow the market and thus, the economy. It thus very important to protect the interests of the investors. investor protection involves various measures established to protect the interests of investors from malpractices. Securities and Exchange Board of India (SEBI) is responsible for regulations of the Mutual Funds and safeguard the interests of the investors. Investor protection measures by SEBI are in place to safeguard the investors from the malpractices in shares, the stock market, Mutual Fund, etc.

The Role of SEBI in Investor Protection SEBI has given out various methods and measures to ensure the investor protection from time to time. It has published various directives, driven many investor awareness programmes, set up investor protection Fund (IPF) to compensate the investors. We will look into the investor protection measures by SEBI in detail.

Investor Protection Measures by SEBI Investor protection legislation is implemented under the Section 11(2) of the SEBI Act. The measures are as follows: Stock Exchange and other securities market business regulation. Registering and regulating the intermediaries of the business like brokers, transfer agents, bankers, trustees, registrars, portfolio managers, investment consultants, merchant bankers, etc. Recording and monitoring the work of custodians, depositors, participants, foreign investors, credit rating agencies, etc. Registering investment schemes like Mutual fund & venture capital funds, and regulating their functioning. Promotion and controlling of self-regulatory companies. Keeping a check on frauds and unfair trading methods related to the securities market. Observing and regulating major transactions and take-over of the companies. Carry out investor awareness and education programme. Train the intermediaries of the business. Inspecting and auditing the security exchanges (SEs) and intermediaries. Assessment of fees and other charges.

Investor Education and Protection Fund(IEPF)
Investor protection measures by SEBI also includes the Government of India established a fund called, Investor Education and Protection Fund(IEPF) under the 1956 Company Act. According to the act, the company which has completed seven years in the business should hand over all the unclaimed fund dividends, matured deposits, and debentures, share application money etc. to the Government through IEPF.

Investor Protection Fund
Investor protection Fund (IPF) is set up by Inter-connected Stock Exchange (ISE) in accordance with the guidelines issued by the Ministry of Finance for investor protection, in order to compensate the claims of investors against the members of exchanges (brokers) who have defaulted or failed to pay. The investor can ask for the compensation if a member (broker) of the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) or any other stock exchange fails to pay the due money for the investments made. The Stock Exchanges have put certain limits on the level of compensation paid to the investors. This limitation has been put according to the discussions and guidance with the IPF Trust. The limit allows that the money to paid as a compensation for a single claim shall not be less than INR 1 lakh - for the case major Stock Exchanges like BSE and NSE - and it should not be less INR 50,000 in case of other Stock Exchanges

Investor Awareness Programme
Investor protection measures by SEBI follows the slogan ‘An informed investor is a safe investor’. SEBI has thus launched the Securities Market Awareness Campaign in January 2003. Such programmes are now regularly organised by SEBI to educate and create awareness among the investors. The programme covers major subjects like portfolio management, Mutual Funds, tax provisions, Investor Protection Fund, Investors’ Grievance Redressal system of SEBI. It also conducts workshops on derivatives, stock exchange trade, Sensex, etc. SEBI has now conducted over 2000 workshops in more than 500 cities across the country. SEBI has marketed the Investor Awareness Programme across all formats like print media, radio, television, and the internet.

The Role of AMFI

Association of Mutual Funds in India (AMFI) was set up on August 22, 1995, is the association of SEBI registered Mutual Funds in India. It was set up to regulate all those who sell Mutual Fund in India. AMFI registration is required to solicit the Mutual Funds and it regulates the members of the association in order to protect the investor from any kind of misselling or unfair investment practices.

Investor protection is among the most talked topics in the securities market. Safeguarding investor interests is one of the top priorities of the regulatory bodies. It is evident that SEBI has put out some hard measures to ensure investor protection. The guidelines and measures are formed to make sure that every aspect of the investor interest in secured. But there is a lot of work to be done yet. The investor awareness programme has certainly helped and will continue to do so. These measures are just the direction for a clean and transparent transaction. It is for issuers and investors to follow the guidelines to really secure the securities market