Authority to an individual or an organisation is always complemented with adequate responsibility. The two cannot work in isolation. While at our office we may be enjoying an authoritative position, as a decision maker it also tags along equal amount of responsibility which makes us accountable for every decision we take. Thus, any given authority is always followed by some responsibility. And to monitor this equation of authority and responsibility, we often have someone above us experienced, who oversees and takes corrective actions to restore the balance between authority and responsibility.

Likewise for the capital markets, it is the Securities and Exchange Board of India (SEBI) who keeps vigil on the activities of the stock markets and the intermediaries therein. Recently, the capital market regulator observed irregularities in the activities of the stock markets, and it decided to take the following actions.

First and foremost the capital market regulator - SEBI has asked the brokers and mutual funds to implement the new common KYC (Know Your Customer) norms even for their existing clients in a phased manner. SEBI has also proposed a ‘code of conduct’ in consultation with the stock exchanges which would detail various obligations that the brokers have towards their clients.

Other initiatives which the SEBI is planning to implement are:
 

• Setting up an alternative trading mechanism for small-cap companies, which witness concentrated shareholding and low trading volumes, thus posing potential risks to the investors
   
• Establishing and maintaining a more effective information management system
   
• Employing latest technology
   
• Maintain high standards of integrity and fairness and also act with due skill, care and diligence in the conduct of their business
   
• Strengthen and monitor the process of follow-up of the findings of inspections of intermediaries
   
• Review the internal audit and inspection process of the stock exchanges
   
• Specific inspections to check the compliance of anti-money laundering rules by the intermediaries
   

Impact on the investors…
Investors in the capital markets and mutual funds will benefit from the above steps taken by the SEBI to keep a check on any malpractices or manipulation of prices. Implementation of common KYC will go a long way in reducing the formalities an investor needs to go through again and again while investing in different investment avenues.

 

Our view:

In our opinion the SEBI should frame a strong ‘code of conduct’ to be followed by the market intermediaries. This will not only keep a check on the illegitimate funds flowing into the country but will also result in better customer service. Furthermore a well regulated capital market will instil confidence amongst the investor community (both domestic as well as foreign investors). The setting up of an alternative trading mechanism for small companies would bring in volumes in the segment by encouraging investor participation and at the same time discouraging traders.

 

Disclaimer: This newsletter is for Private Circulation only and not for sale, is only for information purposes and Quantum Information Services Pvt Limited (PersonalFN) is not providing any professional/investment advice through it and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. PersonalFN disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this newsletter, including without limitation the implied warranties of merchantability and fitness for a particular purpose. PersonalFN and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this newsletter. Use of this newsletter is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. PersonalFN does not warrant completeness or accuracy of any information published in this newsletter. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This newsletter is for your personal use and you shall not resell, copy, or redistribute this newsletter, or use it for any commercial purpose. The user accepts the terms of use on this web site.

Add Comments

Comments
info@grotonwellness.com May 11, 2012 I don't put much faith in presidential cycle patterns, but cosmology tells us that stock markets on earth aren't likely to do very well once the sun burns through enough fuel that it expands into a red giant. I call this the "year 5 billion problem".

 1