General Do's and Don’ts for Investors:
Do’s
Investors Grievances –Rights and Remedies:
Misleading Advertisements: In certain cases publicity material, circulars, brochures are published by the companies, Trading Member or Intermediaries inviting applications from the public for subscription to shares debentures. However, these publicity materials may not form part of the prospectus or letter of offer.
Grievances: Investors have complaints against the advertisement, brochures, circulars which have exaggerated claim of the performance of the company .The above information circulated is marked “This is only an announcement and not a prospectus” or “Private circulation only”. This practice could be misleading to the investing public because it may contain the information not included in the prospectus.
Rights and Remedies:
Disclosures in Prospectus: Prospectus is a document circulated by a company making a public issue inviting applications from the public for subscription to shares / debentures containing adequate disclosures about issue, issuing company and risk factors.
Grievance: In some cases it has been noticed that the prospectus does not contain full particulars regarding progress of work and activities, risk involved, group companies, associates or auditor’s statements regarding servicing of debentures already issued etc., and the disclosures are inadequate. The investor has to make investment decisions on incomplete facts and information.
Rights and Remedies:
Delay in listing of Securities: Some of the companies state in the prospectus that an application has been made to one or more Stock Exchanges for the listing of shares / debentures. This indicates to the investors that the said shares/ debentures will become marketable. However, there is no guarantee that permission will be granted by the Stock Exchange authorities.
Grievance: The dealing in the shares / debentures can commerce only after completion of the listing formalities. In certain cases, companies are unable to complete the said formalities within the prescribed time. This causes delay in allotment of shares / debentures and dispatch of refund orders. The interest of the investor is adversely affected if the permission for dealing in securities is not granted, as the allotment of shares / debentures if made by the company becomes void.
Rights and Remedies:
Delay in Despatch of Allotment Letters / Refund Orders: Companies have to mandatorily ensure timely despatch of allotment letters / certificates and refund orders to the applicants.
Grievance: Investors are put into difficulty if they do not get refund of their money, in case shares are not allotted, Further, they are also put into difficulty, if there is a delay in receipt of certificate / allotment letter.
Rights and Remedies:
Delay in Despatch of Securities: A share certificate under the seal of the company is prima-facie documentary evidence to title of the shareholder to the shares specified therein.
Effective from 31st January, 2009, Applications for IGRC and Arbitration are filed at the concerned Regional Investor Service Centre Mumbai, Delhi, Kolkata and Chennai. Effective from 1st October, 2012, the Exchange has started its IGRC and Arbitration mechanism at four new Regional Investor Service Centres at Hyderabad, Ahmedabad, Indore and Kanpur. The investors shall approach the nearest Regional Investor Service Centre, the most recent address / registered office address of the constituent, as duly communicated in writing to the Trading Member in accordance with regulatory requirement is located. Effective from 31st December, 2013, the Exchange will start its IGRC and Arbitration mechanism at three new Regional Investor Service Centres at Banglore, Jaipur and Pune. The hearings shall be held in the concerned Regional Investor Service Centre where the Applicant has filed the Application for Arbitration.
JURISDICTION OF COURTS:
The Courts in Mumbai shall have exclusive jurisdiction in respect of all proceedings to which the Exchange is a party, and in respect of all other proceedings, the Courts having jurisdiction over the area in which the respective Regional Arbitration Centre is situated, shall have jurisdiction.
The complaints of investors against BSE's Trading Member's are forwarded to the concerned Trading Members for resolution within 3 days from receipt of the exchange letter. In case no reply is received from the Trading Members or the reply received from the Trading Member does not redress the complaint, the same is placed before Investors' Grievances Redressal Committee (IGRC).
If the complaint amount is up to Rs. 25 lakhs then it is heared by one Member in IGRC AND if the complaint amount is more then Rs. 25 lakhs then it is heared by three Member IGRC panel which includes one technical expert. The Exchange has formed separate IGRCs, for each Regional Arbitration Centre to deal with the complaints falling within their region. It will be in the interest of investors to ascertain the concerned Regional Arbitration Centre for filing his / her complaint, since the period consumed in redressal of complaint through IGRC may not be considered while measuring period of 'limitation' in filing arbitration application, if opted, provided the complaint is filed at the concerned Regional Arbitration Centre.
BSE provides services of IGRC which, in its meetings, mediates and counsels the disputing parties for finding amicable solution, for which the Exchange sends Notice of hearing to both the parties to remain present before the said IGRC. In cases, where an amicable solution cannot be reached. IGRC suggests the parties to opt for an arbitration if they so desire. It records the final outcome in the matter in the form of minutes, a copy of which is handed over to the parties or mailed to an absent party.
In case a Trading member fails to implement its part of decision recorded in the said minutes of the IGRC, necessary disciplinary action against it is initiated by BSE.
Arbitration:
The BSE bye-laws provides a mechanism for redressal of dispute between the Trading Members inter-se as well as for between Trading Members and Non-Trading Members through Arbitration Mechanisum. For the purpose of redressing of dispute between Non-Trading Members and Trading Members the Exchange has constituted Arbitration Panels separately for each Regional Arbitration Centres (RACs). The applicant desirous to file an Arbitration Reference is required to file his application in the nearest RAC as defined in the RBR of the Exchange. The Arbitration panel consists of retired High Court and City Civil Court Judges, Chartered Accountants, Company Secretaries, Solicitors and other professionals having knowledge of the capital market, law, Stock market transactions and Finance.
BSE bye-laws also provides for pecuniary jurisdiction for filing of Arbitration Reference which provides that the claim upto Rs. 25 Lacs are decided by single Arbitrator and claim above Rs. 25 Lacs are decided by three Arbitrators.
Arbitration Procedure:
The applicant is required to file relevant Arbitration Application alongwith relevant supporting documents for arbitration. A set of the arbitration document is sent to the other party (respondent) for giving his counter reply. For claims upto Rs. 25 lakhs, the applicant(s) has / have to propose the name of three arbitrators and the respondent(s) has / have to propose thye name of three arbitrators or consent on the name of one of the arbitrators. In case the respondent(s) does / do not consent on the arbitrator, the arbitrators are appointed through CAAP system to adjudicate upon the matter.
For claim above Rs. 25 lakhs, a panel of three arbitrators.
After completion of the formalities, the matter is fixed for hearing before arbitrators. The date for hearing is informed to both the parties. After hearing both the parties and taking the submissions and the documents on record, the arbitrator(s) close the reference and the award (decision) is given.
The award, if not challenged, becomes a decree after expiry of one month from the date of the receipt of the award by the concerned party and can be executed through the Court of competent jurisdiction.
Appeal:
If a party is dissatisfied with the award, the remedy available to it is to prefer an appeal against the Award in the Exchange within one month of the receipt of the award with the Exchange as provided under the RBR of the Exchange. In case party chooses to prefer an appeal in BSE the same is decided by appeal bench comprising of three arbitrators. The award passed by the Appellate Bench is final and binding on the parties subject to challenge in Court of Law.
However, the aggrieved party preferring an appeal in BSE, has to deposit the awarded amount, if any, with the Exchange as per the award given by the original Arbitral Tribunal. In case Award is against Trading Member the awarded amount is set aside from the Trading Member’s security deposit / other monies held by the Exchange and are credited to a separate escrow in the name of the award holder.
The award, if not challenged, becomes a decree after expiry of 120 days from the date of the receipt of the award by the concerned party and can be executed through the Court of competent jurisdiction.
Arbitration Procedure against Defaulter Member of the Exchange:
In case a member is declared as Defaulter, his clients are required to refer their claim to Arbitration. However, the same has to be filed as per the Arbitration and Conciliation Act 1996 as provided under the RBR of the Exchange. The rest of the process is the same as above.
The arbitration Award obtained by investors against defaulters are scrutinized by the Defaulters Committee, a Standing Committee constituted by BSE, which may recommend to the Trustees of the Fund for release of the awarded amount or the amount fixed by the said Committee or Rs.15,00,000/- applicable in case of clients of Trading Members which have been declared defaulter from 5th December, 2009, whichever is lower. After the approval of the Trustees of the Fund, the amount is disbursed to the investors from the Fund.
Investors Protection Fund (IPF).
BSE is the first Exchange to have set up the 'Stock Exchange Investors Protection Fund (IPF) in the interest of the customer's of the defaulter members of the Exchange. This fund was set up on 10th July, 1986 and has been registered with the Charity Commissioner, Government of Maharashtra as a Charitable Fund. The maximum amount of Rs. 10,00,000/- payable to an investor from Investor Protection Fund in the event of a default by a Trading Member has been revised to Rs. 15,00,000; which shall be applicable to the clients of the Trading Member of the Exchange, who will be declared Defaulter after 5th December, 2009. (This has been progressively raised by BSE from Rs.10,000/- in 1988 to the present level).
BSE is the only Exchange in India, which offers the highest compensation of Rs.15 lakhs in respect of the approved claims of any Investor against the defaulter Trading Members of the Exchange.
Trade Guarantee Fund (TGF).
In order to introduce a system of guaranteeing settlement of trades and ensure that market equilibrium is maintained in case of payment default by the Members the Trade Guarantee Fund was constituted and it came into force with effect from May 12, 1997. The main objectives of the fund are as given below:
Addresses of Regulatory Bodies:
Securities & Exchange Board of India (SEBI)
SEBI Bhavan, Plot No. C-4 A, G – Block,
Bandara Kurla Complex,
Mumbai – 400 051.
Department of Company Affairs Company Law Board
Government Of Company Affairs, 2nd Floor, NTC House,
Shastri Bhavan, Rajendra Prasad Road, N. M. Marg, Ballard Estate,
New Delhi – 110 001. Mumbai – 400 01.
- Always deal with the intermediaries registered with SEBI./ stock exchanges.
- Always keep copies of all investment documentation (e.g. application forms, acknowledgement slips, contract notes) and documents you are sending to companies etc.
- Send important documents by reliable mode / registered post to ensure deliver.
- Ensure that you receive contract note at the end of the day/ account statements for every transaction.
- Ensure that you have money before you buy.
- Always settle the dues through the normal banking channels with the market intermediaries.
- Ensure that you have are holding securities before you sell.
- Follow up diligently and promptly e.g. If you do not receive the required documentation within a reasonable time contact the concerned person i.e. the Trading Member, Company etc. immediately.
- Give clear and unambiguous instruction to your Trading Member /agent/ depository participant.
- Mention clearly whether you want to transact in physical mode or demat.
- Investors should take informed investment decision without being influenced by misleading recommendations given in the public media such as newspapers, electronic media, website etc. verify all the claims made in such advertisements.
- Before placing an order with the market intermediaries, please check about the credentials of the companies, its management, fundamentals and recent announcements made by them and various other disclosures made under various regulations. The sources of information are the websites of Exchanges and companies, databases of data vendor, business magazines etc.
- Adopt trading / investment strategies commensurate with your risk-bearing capacity as all investments carry some risk, the degree of which varies according to the investment strategy adopted.
- Carry out due diligence before registering as client with any intermediary. Carefully read and understand the contents stated in the Risk Disclosure Document, which forms part of the investor registration requirement for dealing through brokers.
- Be cautious about stocks which show a sudden spurt in price or trading activity, especially low price stocks.
- There are no guaranteed returns on investment in the stock market.
- Lodge your complaint or Arbitration Application against the Trading Member, at the nearest Regional Arbitration Centre. Please use for the purpose, your address as intimated to your Trading Member by following due process of law.
- Don’t deal with unregistered Trading Members/ sub-brokers, intermediaries.
- Don't execute any documents with any intermediary without fully understanding its terms and conditions.
- Don’t file your grievance/s and / or arbitration application against trading member, in the Regional Arbitration Centre having no jurisdiction. Please use for the purpose, your address as intimated to your Trading Member by following due process of law.
- Don’t forgo taking due documents of transactions, in good faith even from people whom you know.
- Don’t fall prey to promise of unrealistic high returns.
- Don’t get misled by companies showing approval / registrations from Government agencies as the approvals could be for certain other purposes and not for the securities you are buying.
- Don’t transact based on rumours generally called ‘tips’.
- Don't leave the custody of your Demat Transaction slip book in the hands of any intermediary.
- Don’t forget to take note of risks note of risks involved in the investment.
- Don’t get misled by guarantees of repayment of your investments through post-dated cheques.
- Don’t hesitate to approach concerned persons and then the appropriate Authorities.
- Don’t get swayed by promises of high returns.
- Don't get carried away with advertisements about the financial performance of companies in print and electronic media.
- Don't blindly follow media reports on corporate developments, as some of these could be misleading.
- Don't blindly imitate investment decisions of others who may have profited from their investment decisions.
- Calling the Company representative to the Exchange to interact with Investor’s / Members to resolve the complaints.
- Calling major Registrar & Transfer agent to the Exchange to interact and resolve the grievances of the Investor’s and Members of the Exchange.
- Pursuing Mumbai based companies to depute their representative to the Exchange to take the pending list of complaints & resolve the same immediately.
| Types of Complaints | Can be taken up with | |
| a. | Re-validation of transfer deeds | Registrar of Companies (RoC) |
| b. | Regarding bad delivery of shares | Bad Delivery Cell of the Stock Exchange |
| c. | Regarding shares or debentures in unlisted companies | Ministry of Corporate Affairs |
| d. | Deposits in collective investment schemes like plantations etc. | SEBI |
| e. | Units of Mutual Funds | SEBI / AMFI |
| f. | Fixed Deposits in Bank / NBFC | Reserve Bank of India |
| g. | Fixed Deposits in Non – Listed Companies | Ministry of Corporate Affairs |
| h. | Fixed Deposits in manufacturing companies. | Ministry of Corporate Affairs / SEBI |
| i. | Non-receipt of money: Refund in Public / Rights issue Interest / Redemption on debt securities, Fractional entitlement. | Stock Exchange / SEBI |
| j. | Non-receipt of Equity Shares / Debt Securities (Demat & Physical): In Public / Rights issue (including allotment letter), Remat / Transfer / Transmission, Conversion / endorsement / consolidation / splitting / duplicate certificate | Stock Exchange / SEBI |
| k. | Non receipt of corporate benefits / entitlements: Dividend / Bonus / Rights form Buyback / letter of offer Delisting letter of offer Annual Report | Stock Exchange / SEBI |
| l. | Non-receipt of interest for delay in: Refunds / Dividend / Interest on debt security / Redemption of debt security Securities | Stock Exchange / SEBI |
| m. | Others: (including non adherence to corporate governance norms) | Stock Exchange / SEBI |
| 1 | Companies Act : | Investor may refer to Section 68 of the Companies Act and write to Ministry of Corporate Affairs (MCA). The investor can also seek remedy u/s 621. |
| 2 | Consumer Protection Act (COPRA): | Investor can file complaints before the District Forum, state Commission or National commission. |
| 3 | SEBI: | Investor can write to SEBI in case of misleading, advertisements, circulars or brochures. |
| 1 | Companies Act: | Investors can claim compensation for loss suffered by them on account of misstatements made in Prospectus. In such cases, the investor may refer to Section 62 & 63 of the Companies Act and write to the MCA. The investor can also seek remedy u/s 621. |
| 2 | SEBI: | Investors can write to SEBI and obtain redressal with regard to misstatements in the Prospectus, etc. |
| 1 | Companies Act : | In case of delay in listing of securities, the investor may refer to Section 73, 73(1A) & 73(2) of the companies Act and write to the MCA. The Investor can also seek remedy u/s. 621. |
| 2 | SEBI: | Investors can write to SEBI and obtain redressal with regard to delay in listing of securities. |
| 1 | Companies Act : | In case of delay in despatch of allotment letter / refund orders, the investor may refer to Section 73(2A), 73(2B) of the Companies Act and write to the MCA. The investor can also seek remedy u / s. 621. |
| 2 | SEBI: | Investors can write to SEBI and obtain redressal with regard to delay in dispatch of the allotment letters / refund orders. |
Grievance: In certain cases the investors complain with regard to delay in receipt of shares /debentures certificates allotted to them.
Rights and Remedies:| 1 | Companies Act : | In case of delay in dispatch of securities, the investor may refer to Section 113 of the Companies Act and write to the MCA. The investor can also seek remedy u/s. 621 |
| 2 | SEBI: | Investors can write to SEBI and obtain redressal with regard to delay in dispatch of securities. |
Delay in Transfer of Securities: It is the primary right of the shareholder /debenture holder to be able to sell the shares / debentures in the market, and the transferee should get the certificates transferred in his name as soon as possible.
Grievance: In certain cases there has been an inordinate delay in transfer of shares / debentures lodged for transfer and registration. Thus, the transferee may in the intervening period lose certain benefits due to him (i.e. bonus, rights, dividends etc.).
Rights and Remedies:
1 |
Companies Act : |
In case of delay in transfer of securities, the investor may refer to Section 111, 113 of the Companies Act and write to the Company Law Board (CLB) and the MCA respectively. The investors can also seek remedy u/s .621 |
2 |
SEBI: |
Investors can write to SEBI and obtain redressal with regard to delay in transfer of securities. |
Delay in Payment of Interest on Debentures: Investors who would like to have fixed return by way of interest, normally invest in debentures on the assumption that the debentures are secured and risk free investments. Investors are advised to verify whether the company is healthy or sick and check the credit rating of the company before making such investments.
Grievance: There have been instances where investors have complained of non-receipt or delay in the receipt of debentures certificates or interest thereon, non-appointment of Debenture Trustee or non-creation of the stipulated security.
Rights and Remedies:| 1 | Companies Act : | In case of delay in payment of interest on debentures, the investor may refer to Section 118 & 119 of the Companies Act and write to the CLB. The investor can also seek remedy u/s.433 & 434 by approaching the court. |
| 2 | SEBI: | Investors can write to SEBI and obtain redressal with regard to delay in payment of interest on debentures. |
Non–Payment of Dividends: Dividends are declared by the company with the approval of the shareholders in its general meeting. Accordingly, a resolution declaring dividend payable by the company is passed. This becomes a debt due by the company to the shareholders.
Grievance: In certain cases the shareholders complain on non-receipt of the dividend declared by the company.
Rights and Remedies:| 1 | Companies Act : | In case of non-payment of dividends, the investor may refer to Section 205A & 207 of the Companies Act and write to the MCA. The investor can also seek remedy u/s.621. |
| 2 | SEBI: | Investors can write to SEBI and obtain redressal with regard to non-payment of Dividends. |
| 3 |
Consumer Protection Act (COPRA): |
The investor can file complaints before the District forum, State Commission or National Commission depending upon the jurisdiction of the claim involved. |
Insider Trading
Insider is any person who accesses the unpublished price sensitive information of the company before it is available to the general public. Insiders may include corporate officers, directors, owners of the firm, who may be having substantial interest in the equity of the company. They could also be neither corporate officers nor large shareholders, however, they may have access to non-public information due to their relationship with the entity. Insider Trading is an act of buying and selling of securities by a person having unpublished price sensitive information (which is not available in the market) with the intention of making abnormal profits and avoiding losses. This price sensitive information includes declaration Dividend / Bonus / Rights, issue or buy back of amalgamation, mergers or takeovers, major expansion plans, change of policies, etc. SEBI is making all efforts to prevent insider trading and to build up investor confidence. It had set various committees in this regard and on their recommendations various regulations have been implemented to curb the inside trading. Moreover, three other avenues are always available to the investors to seek redressal of their complaints which are through:- Stock Exchange: The investor can bring to the notice of the stock Exchange where the Securities of companies are listed.
- Complaints with Consumer’s Disputes Redressal Forums.
- Suits in the Court of Law.
Investor’s grievances against Trading Member
The nature of complaints received by the Exchange against its Trading Members can be broadly classified into the following categories:| 1 | Non-receipt /delay in payment : | 2 | Non-receipt/delay in securities : |
| 1) Delay in payment 2) Non-receipt of payment 3) Delay in refund of margin payment 4) Non settlement of accounts. | 1) Delay in delivery 2) Non-receipt of delivery 3) Delay in refund of margin deposit 4) Non settlement of accounts. | ||
| 3 | Non-receipt of documents: | 4 | Unauthorized trades/misappropriation : |
| 1) Contract notes 2) Bills 3) Account Statements 4) Agreement Copies. | 1) Unauthorized trades in client account 2) Mis-appropriation of client’s funds / securities. | ||
| 5 | Service related : | 6 | Closing out / squaring up: |
| 1) Excess brokerage 2) Non-execution of order 3) Wrong execution of order 4) Connectivity - system related problem 5) Non-receipt of corporate benefits 6) Other service defaults | 1) Closing off - squaring up position without consent 2) Dispute in Auction value /close out value | ||
| 7 | Non implementation of Arbitration Award | 8 | Others |
- To guarantee settlement of bonafide transactions of Trading Members of the Exchange inter se which form part of the Stock Exchange settlement system,
- To inculcate confidence in the minds of secondary market participants generally and global Investors’, particularly to attract larger number of domestic and international players in the capital market.
- To protect the interest of Investors’ and to promote the development of and regulation of the secondary market.
- BSE Institute Ltd. (Formerly known as BSE Training Institute) which organises Training programs periodically on various subjects like comprehensive programs on Capital Markets, Fundamental Analysis, Technical Analysis, Derivatives, Index Futures and Options, Debt Market, etc. Further, for the Derivatives market BSE also conducts the compulsory BSE’s Certification on Derivatives Exchange (BCDE) certification for Trading Members and their dealers to impart basic minimum knowledge of the derivatives markets.
- BSE's official Website: www.bseindia.com which is the focal point for information dissemination and updates Investors with the latest information on Stock Markets on a daily basis through real time updation of statistical data on Market activity, corporate information and results. Educative articles on various products and processes are also available on the site.
- Publications: BSE regularly comes out with publications for Investor education on various products and processes like Quick Reference Guide for Investors.
- Arbitration Schedule : The schedule of Arbitration hearing to be held is displayed on www.bseindia.com
- Trade Confirmation system: The Investors can now cross verify their trades done on BSE through www.beindia.com if they have a Contract Note with the concerned trade.
- Trade Alerts through SMSs/Emails: In order to safeguard investor interest, BSE sends trade alerts to investors on their mobiles and emails updated by brokers on BSE’s database.
Addresses of BSE Investor service Centers at Cochin & Rajkot are as follows :
CochinBSE Investor Service Centre4th Floor, M.E.S. Dr.P.K. Abdul Gafoor Memorial Culture Complex, Judges Avenues, Kaloor, Cochin - 682017.Tel. Nos.: 0484-2405275 /0484–2405276Contact person - Mr. Sumith C.S.E-mail :sumith.cs@bseindia.com |
RajkotBSE Investor Service Centre401, 4th Floor, Aalap - B, Limda Chowk, Opp. Shastri Maidan, Rajkot - 360 001 Tel. Nos.: 0281 – 6595 542 / 2464 348 Contact person - Mr. Kartik Bavishi E-mail :kartik.bavishi@bseindia.com |