Indian capital market: challenges to investor protection regime

Abstract

The Indian market is one of the main and promising emerging security markets in the world. The capital market in its entirety can be sub-divided into Primary market and Secondary market. In the entire structure of Capital market, investor is the primary stakeholder. In India financial regulators, such as the Securities and Exchange Board of India (SEBI)/Reserve Bank of India (RBI) keep an eye on the activities of the capital markets in their designated jurisdictions to ensure that investors are protected against frauds, unfair trade practices and ensuring healthy functioning of the market, among other duties. An investor should require protection through an external regulatory body, like the SEBI only when the market mechanism collapses due to fraudulent act of some ingenious market players: an unprecedented act, which could not have been reasonably perceived at the time of framing the regulation. The need of protection is also based on the experience that financial investors are usually structurally inferior to providers of financial services and products due to lack of professional knowledge, information or experience. Market manipulation, insider trading and fraudulent practices are, therefore, generally identified as the primary areas of concern in protecting the interests of investors in securities. In order to afford adequate protection to the investors, provisions have been incorporated in different legislations supplemented by many guidelines, circulars and press notes issued by the Ministry of Finance, Ministry of Law, Justice and Company Affairs and SEBI from time to time. The legislations as well as rules and regulations notified there under list out the disclosure requirements to be complied by the companies and also punishments and remedies for failure of compliance. In light of the aforesaid, the dissertation report centres around the protection of interest of investors in Indian capital market and the role of Securities Exchange Board of India and other regulatory bodies. The report also emphasis on the legal framework and the measures adopted therein; pertaining to the issue and challenges associated therewith. The dissertation report is inspired by the fact that despite of having a history of over 125 years, Indian Capital Market it has the reputation for being a snake pit, lacking in fairness and integrity, prone to speculative excess and showing scant regard for the interests of small investors.