Chapter 4: Investor Protection in India

Chapter 4: Investor Protection in India
4.1. Introduction
The enactment of the Securities Contracts (Regulation) Act (SCRA) in 1956, was the
beginning of investor protection concerns in India. Since then investor protection has
been receiving keen attention from various agencies like the legislating bodies, market
regulator, stock exchanges, retail investors, and above all the Securities Exchange Board
of India (SEBI), investor protection is important for a thriving securities market or other
financial investment institutions. It is the effort to make sure that those who invest their
money in regulated financial products are not defrauded by brokers or other parties.
Investor protection measures must aim at protecting monies of those who buy into
various investment opportunities. Hence investor protection is a necessity for true capital
formation. It is very important in developing investors‘ confidence and facilitating
investment strategies according to the needs of the investors. It should help efficient
capital markets that are reliable and trustworthy in the eyes of investors. Such rules are
thus essential in favoring financial stability.
4.2. Broad Categories of Investor Protection in India
Beginning with the Securities Contract (Regulation) 1956, India has used a broad
spectrum of regulatory and legal measures to strengthen Investor Protection. There are
also some non-Governmental Institutions that help educate investors and thus protect
their interests. Some of the main legislations governing the securities market are
explained here.
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4.2.1. Companies Act, 1956
The Companies Act, 1956, empowers the Central Government to regulate the formation,
financing, functioning and winding up of companies. The Act empowers the Central
Government to inspect the books of accounts of a company, to direct special audit, to
order investigation into the affairs of a company and to launch prosecution for violation
of the Act to find out especially whether any unfair practices prejudicial to the public
interest are being resorted to by the company or a group of companies under scrutiny, and
to examine what may adversely affect the interest of the shareholders, creditors etc., and
action initiated under provisions of the Companies Act if fraud is found, or the same is
referred to the Central Bureau of Investigation. The Act also provides for greater and
effective control of shareholders and a true disclosure of the affairs of companies in their
annual published balance sheet and accounts. The Act entails upon the company to
maintain a proper standard of accounting and auditing, and more.
4.2.2. Securities Contracts (Regulation) Act (SCRA), 1956
This act mainly deals with establishment of stock Exchanges, listing agreements, and
defining ‗Securities‘. Most of its power is now delegated to SEBI. It provides the Central
Government with a direct and indirect control of almost all aspects of the securities
trading, including the running of stock exchanges. It aims to prevent undesirable
transaction in securities and to regulate the working of stock exchanges in the country. It
gives the Central Government regulatory jurisdiction over (a) Stock exchanges through a
process of recognition and continued supervision, (b) contracts in securities, and (c)
listing of securities on stock exchanges.
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As a condition of recognition, stock exchanges comply with the requirements
prescribed by the Central Government. Also, the stock exchanges have to frame their
own listing regulations in consonance with the minimum listing criteria set out in
Securities Contracts Regulation Rules, 1956. Section 6 of the Act empowers the Central
Government recognition powers of stock exchanges; Section 12, the power to suspend
business of recognized stock exchange; and Section 24 (1) and (2) to penalize involved
personnel of an offending company. The Securities Contract (Regulation) Act, 1956 deals
with stock exchanges, contracts in securities, and listing of securities on stock exchanges,
and keeps a vigil over all the stock exchanges of India and through a process of
recognition and continued supervision, prevents undesirable contracts in Securities
market. The provision of the Act came into force with effect from 20th February, 1957,
Notification No. SRO 528, dated 16th February, 1957.139
4.2.3. Securities Contracts Regulation Rules, 1957
It is a broad-based and well-dispersed structure in shareholding and is very important for
the sustenance of a continuous market for listed securities to find and maintain fair prices
and provide liquidity to the investors. Moreover, the larger the number of shareholders,
the less is the scope for price manipulation. The Securities Contracts Regulation Rules,
1957, sets down the requirements which have to be satisfied by companies for the
139
https://www.nls.ac.in/resources/ded/classnotesforyear2010ded/MBL_II_web_Oct_2010/Invest
ment Law. pdf
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purpose of getting their securities listed on any stock exchange in India. Further, the
larger the number of shareholders, the less is the scope for price manipulation.140
4.2.4. National Stock Exchange of India (NSE), 1993
Established in 1993, NSE functions as the main stock exchange of India, offering
infrastructure and standards that are accepted as model by the securities industries for
―trading systems, clearing and settlement practices and procedures.‖ Many entities
involved in the securities market have adopted NSE‘s highly transparent, screen-based
and automated trading system with its global access to investors. The Wholesale Debt
Market Segment of NSE has been offering investors a trading stage for Government
Securities.
With the introduction of Index Futures, Stock Futures, and Index Options, the
Derivatives Market too has been experiencing a continuous development.
The development of a pool of human resources having right skills and expertise to
help enhance quality intermediation in the financial markets is very important. NSE,
through its education programs, helped in cultivation of ―a culture of knowledge to help
investors take informed decisions relating to the securities market and has initiated a
number of educational initiatives such as certification programs, training, financial
literacy at school level, short term courses at college level etc.‖141
140
http://www.caclubindia.com/forum/rule-19-2-b-mandates-initial-amp-continuous-listing-of-
25--86207.asp
141
http://www.nse-india.com/education/content/education.htm
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4.2.5. Securitization and Reconstruction of Financial Asset and Enforcement of
Security Interest Act (SERFAESI), 2002
SARFAESI Act (2002), enacted to regulate securitization and reconstruction of financial
assets. It also enforced the security interest created by the financial assets and enabled
such assets to be realized. The Act provided for the manner of enforcement of security
interest by secured creditor without the cumbersome intervention of a tribunal or a court.
Under the SARFAESI Act, the Central Government has prescribed Security
Interest Enforcement Rules. Exercising the powers given it by SARFAESI Act, 2002,
Reserve Bank of India has issued guidelines on registration, measures of asset
reconstruction, prudential norms, acquisition of financial assets etc., namely 'The
Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and
Directions, 2003'. 142
4.2.6. Securities Exchange Board of India Act (SEBI), 1992
The main legislative and regulatory instrument for investor protection in India is the
Securities Exchange Board of India (SEBI) Act, 1992. It gives a wide-ranging statutory
power to SEBI, drawing from the previous Securities Control (Regulation) Act (SCRA),
1956, and the Companies Act, 1956.
Its regulatory jurisdiction covers Corporates issuing securities and all
intermediaries and persons associated with securities market. It can conduct enquiries,
audits and inspection of all concerned participants and adjudicate offenses under this Act.
It has the power to register and regulate all the market intermediaries. Further it can
142
http://www.iarc.co.in/content.php?cid=MjA=&mid=NQ
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penalize them in case of violation of the provision of the Act, Rules and Regulations
made there under. SEBI has full autonomy and authority to regulate and develop an
orderly securities market by:
(a) Promoting the development of the securities market
(b) Protecting the interests of investors in the securities market
The following investor protection powers are vested on SEBI by the SEBI Act, 1992:
1. Investigation
2. Prosecution
3. Adjudication
4. Punitive Measures
4.2.7. Investor Education
The virtual domain has provided an interface for Retail Investors nationwide to unite,
use and share the vast amount of financial and investment information disseminated
online. A retail investor is an individual who purchases securities for his or her own
personal account rather than for an organization. Retail investing activity seems
insignificant in the shadow of institutional investing activity. Not only do retail investors
make smaller trades, they also tend to trade less frequently than institutional investors.
However, the widening use of online trading and better access to financial information
has increased the number of retail investors in recent years and this makes investor
education and protection vitally important. In March 2003, there were 350 cities in India
disseminating Investor Information, with a turnover of Rs 2,158 crore and 8.85 lakhs
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trades through the cash market each day. It is of prime importance that the independent
and objective investor must be educated to make informed investment decisions, and
avoid becoming victims of financial frauds. An example of such a fraud on small
investors is the case of the fake Mother Teresa Co-operative Bank in Hyderabad, the
capital of the erstwhile united Andhra Pradesh.143
The Ministry of Corporate Affairs has instituted a Committee to look into the
various aspects of Investor Education and Protection.144 The Ministry of Corporate
Affairs has also instituted an Investor Education and Protection Fund (IEPF), ―for
promotion of investors‘ awareness and protection of the interests of investors.‖145
4.2.8. Regulatory Legislations and Other Investor Protection Measures
The regulatory legislations and other investor protection measures include:
 Foreign Exchange Management Act-1999 Securities and Insurance
 Laws (Amendment and Validation) Act, 2010 and other relevant legislations
 Indian Contract Act 1872
 Depositories Act, 1996.
 Prevention of Money Laundering Act, 2000
 Income Tax Act,1961
 Securities Transactions Tax Act, 2004
 Clause 49 of Listing Agreement
 Prevention of Corruption Act

143
http://www.ucanews.com/story-archive/?post_name=/2002/11/04/police-arrest-managers-of-
fake-mother-teresa-bank-in-south-india&post_id=21570
144
http://www.mca.gov.in/MinistryV2/chapter7.html
145
http://www.iepf.gov.in/
111
 CARO 2003
 Indian Penal Code
4.2.9. Financial Intermediaries in Financial Market
The financial intermediaries and their role is presented as follows:
4.2.9.1. Role of Financial Intermediaries
Financial Intermediaries are institutions that channel funds from savers to users, that is,
between surplus and deficit agents. Financial intermediaries are the middlemen between
the people who save money and those who want money. Banks, insurance companies,
pension funds, mutual funds, etc., are the examples of financial intermediaries. Money
from the savers (or lenders) is received by them and they loan it directly or indirectly to
the borrowers (government/ businessmen). The borrower (government/businessman) pays
the interest rate on this loan. The intermediary (bank/insurance/pension or mutual fund)
gets a commission, and the saver or surplus agent will earn some profit/interest/
dividend/return on the investment. Thus, financial intermediaries serve as a middleman
between saver and borrower.
4.2.9.2. The Necessity of Financial Intermediaries
Financial intermediaries are necessary because they are well-equipped to bring a
saver/lender and a borrower together. Not only do they have the awareness of who needs
the money, they also have thousands of employees to do all the leg-work before a loan is
sanctioned. Moreover, those who need to borrow, come to them, because they are well-
known. So, they have a large client base. Thus, even though the Financial Intermediaries
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are middle-men, they are an important, necessary and integral part of the financial
market.
4.2.9.3. Safety of Investment
Financial intermediaries ensure safety of the investment because they invest in diversified
portfolios and hence suffer less risk compared to an individual investor. More
importantly, financial intermediaries are supervised by regulators (RBI, SEBI, IRDA etc.)
so, cannot easily involve in fraudulent practices or ignore the responsibility to the small
investors. Financial intermediaries also offer a reasonable return on investment, while
their profit margin is reasonable - and so the small investor gets a fair deal from them.
4.2.9.4. Expertise
Financial Intermediaries have a body of experts on their staff, capable of understanding
share market fluctuations, the performance of individual companies, which companies‘
shares are likely to go up in a near future, etc., and so is equipped to take informed
investment decisions, scrutinize credit history/record of a borrower before granting loans,
and to recover the loans given.146
4.3. SEBI and Investigation, Enforcement and Surveillance (IES)
To improve the investors‘ confidence and solidarity as well as the safety of the market,
146
http://mrunal.org/2013/04/economy-financial-intermediaries-meaning-functions-examples-
advantages-explained.html#8
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SEBI has taken several steps both in individual cases and at systematic levels regarding
violations, defaults and market abuse 147 which are elaborated below:
4.3.1. Investigation
The steps involved in investigation process are presented as follows:
4.3.1.1. Background of Investigation Process
Investigation procedures employed by SEBI turned more consolidated during 1997-98
and resulted in fewer allegations on market manipulation and price misrepresentation
being reported. Through the SEBI Acts and rules and regulations completion of
investigation, administrative directions as well as due penal measures were realized.
Among other actions taken, were ―monetary penalties, warning, suspension of activities
and cancellation of registration, refund of issue proceeds, prohibiting access to the
securities markets and ordering compensation of undue or ill-gotten gains.‖148
4.3.1.2. Investigations Done by SEBI
Investigation is defined as ―the identification of persons who might be involved in the
violations, collection of elaborate data regarding primary issues, transactions in the
secondary markets, trading details, followed by verification and analysis of the same.‖149
It is divided into preliminary inquiries and formal investigations. It utilizes
questionnaires, books, records, recorded statements, etc. Finally, based on the relevant
Acts and regulations, the due penal actions are taken. The penalty varies from monetary
147
http://www.sebi.gov.in/sebiweb/home/list/4/24/0/0/Annual-Reports
148
http://www.sebi.gov.in/cms/sebi_data/commondocs/ar97982g_h.html
149
http://www.slideshare.net/manmeetsinghb/englishpptppt-f
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forfeit, warning, suspension from work, paying back or seizing what has been abused, to
other sentences.150
For the purpose of this study, investigations done by SEBI are divided into two
distinct periods as follows:
4.3.1.2.1. Investigations Done in the Past
An enactment in 1995-96 banned fraudulent practices in trading, the unregistered
intermediaries, investors or clients have been brought within the scope of the concern of
SEBI, which leads to SEBI‘s consolidating its investigation practices.
Through the SEBI Act, 1992, SEBI was conferred the statutory authority to call
for the production of the documents and recording of the statements as well as gathering
the investors‘ information, however the abovementioned authorities were questioned in
the Gujarat High Court which claimed that SEBI‘s authorities can be misapplied against
any intermediary investor or client involved in securities markets, whether registered or
not registered with SEBI.
4.3.1.2.2. Investigations Done at Present
To safeguard the investors‘ interest in an effective market, the investigation cases must be
concluded at the right time, and suitable preventive actions must be taken in case of
violations of established securities laws. It is also important to raise the investors‘
confidence and trust in the market; hence SEBI is endeavoring to develop investigative
skills through utilizing Information Technology.
150
http://www.sebi.gov.in/cms/sebi_data/commondocs/pt2g_h.html
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The International Organization of Securities Commissions (IOSCO) underscored
the significance of an organized investigation in its ―Principles for the Enforcement of
Securities Regulation‖ while SEBI has developed investigations to explore any
possibility of violations of laws and regulations of securities market. These potential
violations may involve ―price manipulation, creation of artificial market, insider trading,
capital issue related irregularities, takeover related violations, non-compliance of
disclosure requirements and any other misconduct in the securities markets.‖151
4.3.1.3. Initiation of Investigation
To initiate an investigation, there are many different sources to refer. To start, SEBI
utilized references available from sources such as ―stock exchanges, internal surveillance
department, other government departments, information submitted by market participants
and complainants.‖ Investigations may also start on its own initiatives where there are
enough reasons for the investors‘ interests‘ being breached or the securities laws‘ being
manipulated.152
4.3.1.4. Process of Investigation
The process of investigation involves analyzing the market data as well as static data to
collect evidence and detect individuals or entities perpetrating irregularities and violating
the regulations; it is only then that the due effective regulatory measures can be taken.
The enforcement action resulted from investigation makes those involved in markets to
adhere to the law of standards of conduct in the market.153
151
http://shodhganga.inflibnet.ac.in/bitstream/10603/7800/20/20_chapter%2014.pdf
152
http://thelinkpaper.ca/?p=10370
153
http://www.scribd.com/doc/120928741/SEBI
115
4.3.1.5. Trends in Investigation Cases
Since 1992-93, SEBI has taken 1617 investigation cases out of which, 1420 cases have
been completed. Besides the resulting enforcement action, such investigations can cause
a change in policies to consolidate the regulatory and enforcement domain. Out of the
154 cases taken during 2011-12, 74 cases were investigated completely. Table 4.1, 4.2,
and figure 4.1 show full records of the total number of cases taken up by SEBI for
investigations and cases completed in each year.
Table 4.1: The Number of Cases Investigated by SEBI during 1992-2012
Year Cases Taken up for Investigation Cases Completed
1992-93 2 2
1993-94 3 3
1994-95 2 2
1995-96 60 18
1996-97 122 55
1997-98 53 46
1998-99 55 60
1999-00 56 57
2000-01 68 46
2001-02 111 29
2002-03 125 106
2003-04 121 152
2004-05 130 179
2005-06 159 81
2006-07 120 102
2007-08 25 169
2008-09 76 83
2009-10 71 74
2010-11 104 82
2011-12 154 74
Total 1617 1420
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For the ease of analysis the numbers of table 4.1 are shown in percentage in table 4.2 and
figure 4.1.
Table 4.2: The Percentage of Cases Investigated by SEBI during 1992-2012
Year Cases Taken up for Investigation Cases Completed
1992-93 0.12 0.14

1993-94 0.19 0.21
1994-95 0.12 0.14
1995-96 3.71 1.27
1996-97 7.54 3.87
1997-98 3.28 3.24
1998-99 3.40 4.23
1999-00 3.46 4.01
2000-01 4.21 3.24
2001-02 6.86 2.04
2002-03 7.73 7.46
2003-04 7.48 10.70
2004-05 8.04 12.61
2005-06 9.83 5.70
2006-07 7.42 7.18
2007-08 1.55 11.90
2008-09 4.70 5.85
2009-10 4.39 5.21
2010-11 6.43 5.77
2011-12 9.52 5.21
Total 100.00 100.00
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Figure 4.1: The Percentage of Cases investigated by SEBI during 1992-2012
25
20
15
10
Cases Taken up for Investigation Cases Completed
As it can be observed, no significant changes happened in the early years (1992-95), but
in 1995 when SEBI formally started its activity, a sharp leap happened both in cases
taken up and cases completed. After 1995, a rising trend can be observed in the cases
completed. In 2005- 2006, the cases taken up reached its peak at 9.83 percent, while the
peak of cases completed was in 2004-2005 at 12.61 percent. The findings indicate the
significant increase of the fraudulent practices in this year and SEBI‘s significance in
completing the cases taken up in 2004-2005. It an be observed that till the end of 2012
there are about 200 cases uncompleted.
4.3.1.6. Nature of Investigation Cases
The nature of investigation cases is divided into 5 elements, namely Market Manipulation
and Price Rigging; Capital Issue related Manipulation; Insider Trading; Takeovers; and
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Miscellaneous. All the elements will be analyzed separately for investigation cases taken
up and investigation cases completed.
4.3.1.6.1. Nature of Investigation Cases Taken up
As shown in tables 4.3, 4.4 and figure 4.2, the nature of investigation cases taken up will
be explored in terms of Market Manipulation and Price Rigging; Capital Issue Related
Manipulation; Insider Trading; Takeovers; and Miscellaneous in a time span from 1996-
2012.
Table 4.3: Nature of Investigation Cases Taken up during 1996-2012
Particulars
Years Market Capital Issue

Insider
Manipulation and related Takeovers Miscellaneous
Trading
Price Rigging Manipulation
1996 -1997 67 24 4 3 13
1997 -1998 29 14 5 3 1
1998 -1999 40 4 4 6 1
1999 -2000 47 2 3 1 3
2000 -2001 47 5 6 1 9
2001 -2002 86 1 16 1 7
2002 -2003 95 2 13 9 6
2003 -2004 96 2 14 2 7
2004 -2005 110 2 7 1 10
2005 -2006 137 3 6 4 15
2006 -2007 102 0 18 2 5
2007 -2008 12 0 7 2 4
2008 -2009 52 2 14 3 5
2009 -2010 44 2 10 2 13
2010-2011 56 6 28 4 10
2011-2012 73 35 24 2 20
Total 1093 104 179 46 129
figure 4.2.
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Table 4.4: Percentage of Nature of Investigation Cases Taken up during 1996-2012
Particulars
Years
Market Capital “Issue”
Insider
Manipulation and related Takeovers Miscellaneous
Trading
1996 -1997 6.13 23.08 2.23 6.52 10.08
1997 -1998 2.65 13.46 2.79 6.52 0.78
1998 -1999 3.66 3.85 2.23 13.04 0.78
1999 -2000 4.30 1.92 1.68 2.17 2.33
2000 -2001 4.30 4.81 3.35 2.17 6.98
2001 -2002 7.87 0.96 8.94 2.17 5.43
2002 -2003 8.69 1.92 7.26 19.57 4.65
2003 -2004 8.78 1.92 7.82 4.35 5.43
2004 -2005 10.06 1.92 3.91 2.17 7.75
2005 -2006 12.53 2.88 3.35 8.70 11.63
2006 -2007 9.33 0.00 10.06 4.35 3.88
2007 -2008 1.10 0.00 3.91 4.35 3.10
2008 -2009 4.76 1.92 7.82 6.52 3.88
2009 -2010 4.03 1.92 5.59 4.35 10.08
2010-2011 5.12 5.77 15.64 8.70 7.75
2011-2012 6.68 33.65 13.41 4.35 15.50
Total 100.00 100.00 100.00 100.00 100.00
121
Figure 4.2: Percentage of Nature of Investigation Cases Taken up during 1996-2012
80
70
60
50
40
30
20
10
Market Manipulation and Price Rigging Capital ―Issue‖ related Manipulation

Insider Trading Takeovers
Miscellaneous
The findings show that since 1996 till 2012, continuous fluctuations have been observed
in all the five types of violations. Market Manipulation and Price Rigging reached its
peak at12.53 percent in 2005-2006; Capital Issue related Manipulation at 33.65 percent in
2011-2012; Insider Trading at 15.64 percent in 2010-2011; Takeovers at 19.57 percent in
2002-2003; and finally Miscellaneous at 15.50 percent in the years 2011-2012. It can be
concluded overall that a drop is observable in different cases of frauds from 2006 t0 2008
which can be attributed to SEBI‘s measures to complete the cases since 2005.
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4.3.1.6.2. Nature of Investigation Cases Completed
The nature of investigation cases completed will be also investigated in terms of the five
violations: Market Manipulation and Price Rigging; Capital Issue related Manipulation;
Insider Trading; Takeovers; and Miscellaneous in a time span from 1996 to 2012. The
findings are as follows:
Table 4.5: Nature of Investigation Cases Completed during 1996-2012
Particulars
Years Market Capital “Issue”

Insider
Manipulation and Related Takeovers Miscellaneous
Trading
1996 -1997 0 0 0 0 0
1997 -1998 0 0 0 0 0
1998 -1999 31 16 4 6 3
1999 -2000 37 8 5 0 7
2000 -2001 27 8 3 4 4
2001 -2002 11 0 1 6 3
2002 -2003 72 8 14 7 5
2003 -2004 122 3 9 3 15
2004 -2005 148 2 10 2 17
2005 -2006 62 1 8 3 7
2006 -2007 77 4 10 3 8
2007 -2008 115 3 28 2 21
2008 -2009 62 1 12 1 7
2009 -2010 46 7 10 5 6
2010-2011 51 2 15 4 10
2011-2012 37 4 21 2 10
Total 898 67 150 48 123
122
figure 4.3.
Table 4.6: Percentage of Nature of Investigation Cases Completed during 1996-2012
Particulars
Years
Market Capital “Issue”
Insider
Manipulation and Related Takeovers Miscellaneous
Trading
1996 -1997 0.00 0.00 0.00 0.00 0.00
1997 -1998 0.00 0.00 0.00 0.00 0.00
1998 -1999 3.45 23.88 2.67 12.50 2.44
1999 -2000 4.12 11.94 3.33 0.00 5.69
2000 -2001 3.01 11.94 2.00 8.33 3.25
2001 -2002 1.22 0.00 0.67 12.50 2.44
2002 -2003 8.02 11.94 9.33 14.58 4.07
2003 -2004 13.59 4.48 6.00 6.25 12.20
2004 -2005 16.48 2.99 6.67 4.17 13.82
2005 -2006 6.90 1.49 5.33 6.25 5.69
2006 -2007 8.57 5.97 6.67 6.25 6.50
2007 -2008 12.81 4.48 18.67 4.17 17.07
2008 -2009 6.90 1.49 8.00 2.08 5.69
2009 -2010 5.12 10.45 6.67 10.42 4.88
2010-2011 5.68 2.99 10.00 8.33 8.13
2011-2012 4.12 5.97 14.00 4.17 8.13
Total 100.00 100.00 100.00 100.00 100.00
123
Figure 4.3: Percentage of Nature of Investigation Cases Completed during 1996-
2012
70
60
50
40
30
20
10
Market Manipulation and Price Rigging Capital “Issue” related Manipulation

Insider Trading Takeovers
Miscellaneous
To start with the first two years, i.e., 1996-97 and 1997-98, the findings show null value
which means no investigation cases has been completed during these years. 1998
onwards, completed investigations on Market Manipulation and Price Rigging reached its
peak at 16.48 in 2004-2005. As shown in table 4.3, SEBI has had a great endeavor in
completing the cases in years 2004-2005. It conveys a significant rise in the completion
of the investigations of violations. In case of Capital Issue Related Manipulation, the
highest percentage was 23.88 in 1998-1999; Insider Trading, 18.68 in 2007-2008;
Takeovers, 14.58 in 2002-2003; and Miscellaneous, 17.07 in 2007-2008.
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4.3.1.7. Regulatory Actions
Penal measures are taken, after investigations are completed, based on what is
recommended in investigation reports which have to be also affirmed by an authority.
The recommended actions should observe the principles of objectivity, consistency,
materiality, as well as the reliability of the evidences available. The action included
―issuing warning letters, initiating enquiry proceedings for registered intermediaries,
initiating adjudication proceedings for levy of monetary penalties, passing directions
under Section 11 of SEBI Act, 1992, and initiating prosecution and referring the matters
to other regulatory agencies.‖154
SEBI has laid more stress on issuance of prohibitive orders following Section 11
of the SEBI Act, 1992 which enjoy a profitable deterrence effect and work as an effective
tool in circumstances calling for urgent reactions. During 2011-12, SEBI issued 487 such
directions; tables 4.7 and 4.8 as well as figure 4.4 provide a comprehensive account of all
types of these regulatory actions taken by SEBI during 2004-2012.
154
125
Table 4.7: Different Types of Regulatory Actions Taken by SEBI during 2004-2012
Particulars (Number of Entities)
Years Administrative
Prohibitive
Warning/Warning Advice
Warning Directions Issued
Suspension Cancellation Letter Issued and Letter
Issued under Section 11
Deficiency Observations Issued
of SEBI Act
Issued
2004-05 42 53 134 3 0 0
2005-06 36 71 632 2 0 0
2006-07 52 27 345 0 0 0
2007-08 44 48 537 0 0 0
2008-09 46 179 230 0 6 0
2009-10 48 37 691 0 156 0
2010-11 36 17 268 5 63 0
2011-12 16 33 487 0 946 4
Total 320 465 3324 10 1171 4
For the ease of analysis, the numbers of table 4.7 are represented in percentage in table
4.8 and figure 4.4.
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Table 4.8: Percentage of Different Types of Regulatory Actions Taken by SEBI
during 2004-2012
Particulars(Number of Entities)
Years
Prohibitive Administrative
Advice
Warning Directions Issued Warning/Warning Letter
Suspension Cancellation Letter
Issued under Section 11 of Issued and Deficiency
Issued
SEBI Act Observations Issued
2004-05 13.13 11.40 4.03 30.00 0.00 0
2005-06 11.25 15.27 19.01 20.00 0.00 0
2006-07 16.25 5.81 10.38 0.00 0.00 0
2007-08 13.75 10.32 16.16 0.00 0.00 0
2008-09 14.38 38.49 6.92 0.00 0.51 0
2009-10 15.00 7.96 20.79 0.00 13.32 0
2010-11 11.25 3.66 8.06 50.00 5.38 0
2011-12 5.00 7.10 14.65 0.00 80.79 100.00
Total 100.00 100.00 100.00 100.00 100.00 100.00
127
Figure 4.4: Percentage of Different Types of Regulatory Actions Taken by SEBI
during 2004-2012
60
50
40
30
20
10
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Suspension
Warning Issued
Prohibitive Directions Issued under Section 11 of SEBI Act
Cancellation
Administrative Warning/Warning Letter Issued and Deficiency Observations

Issued
Advice Letter Issued
Based on the tables 4.7, 4.8, and figure 4.4, Suspension descended to its lowest amount in
2011-2012 indicating a decrease in the course of violation. Warning Issued had been
fluctuating until it finally reached its peak in 2008-2009 and thence had a descending
move. All the other four types, namely Prohibitive Directions Issued under Section 11 of
SEBI Ac; Cancellation; Administrative Warning/Warning Letter Issued and Deficiency
128
Observations Issued; and Advice Letter Issued, reached their peak in 2011-2012
testifying to SEBI‘s laying the most stress on deterring and detecting violations. In the
case of Administrative Warning/Warning Letter Issued and Deficiency Observations
Issued, SEBI resolved to deter the repetition of such practices in 2011-2012.
4.3.2. Enforcement of Regulations
To make the performance of regulatory system more effective, the regulations must be
enforced in the form of effective follow-ups and disciplinary actions.
4.3.2.1. Enforcement Mechanisms
SEBI has implied five enforcement mechanisms facing any violation(s) as to the laws
regulating the securities market. An age-wise detailed analysis of enforcement actions,
namely actions u/s 11, 11B and 11D of SEBI Act, enquiry proceedings, adjudication
proceedings, prosecution proceedings, and summary proceedings as on March 31, 2012
are elaborated below:
I. Section 11/11B Proceedings
Under section 11/11B of SEBI Act, 1992, SEBI is entitled to issue directions or
prohibitive orders such as denying any access to or transactions in security markets. An
account of numbers of actions initiated, disposed, aggregate disposal and cases pending
appeared in the tables 4.9.
129
Table 4.9: Age-wise Analysis of Enforcement Actions - U/S 11, 11B and 11D of SEBI
ACT during March 31,1995-March 31, 2012
No. of Actions Disposed

provision of law
No. of Actions
Pending cases
Initiated on
Disposal
Aggregate
Year
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
1995-96 0 0 0 0
1996-97 3 3 0 3 0
1997-98 85 6 15 9 34 1 14 4 0 83 2
1998-99 51 9 9 26 7 0 0 51 0
1999-00 83 13 12 10 20 19 1 5 3 0 83 0
2000-01 461 269 18 45 49 28 1 2 2 15 0 3 4 436 25
2001-02 441 390 32 12 1 3 2 0 0 1 441 0
2002-03 321 58 74 30 21 8 21 30 24 7 25 298 23
2003-04 713 30 135 45 94 197 47 52 33 25 658 55
2004-05 522 2 38 39 168 105 85 19 46 502 20
2005-06 196 1 12 31 65 69 18 0 196 0
2006-07 402 34 67 65 119 54 15 354 48
2007-08 374 58 75 61 61 48 303 71
2008-09 75 8 44 23 0 75 0
2009-10 376 30 69 114 213 163
2010-11 346 30 87 117 229
2011-12 348 10 10 338
Total 4,797 0 0 6 3 28 299 427 215 192 196 107 189 561 412 493 320 375 3,823 974
In 2011-12 ,a total number of 375 cases under section 11/11B were disposed by SEBI. In
the same financial year, 348 new cases under the caption provision of law were initiated
by SEBI. As it can be seen, the highest number of cases disposed relates to 2003-004.
The total pending cases on March 31, 2012 were 974.
131
For the ease of analysis, table 4.9 is represented in percentage in table 4.10.
Table 4.10:Percentage of Age-wise Analysis of Enforcement Actions - U/S 11, 11B
and 11D of SEBI ACT during March 31, 1995 to March 31, 2012
No. of Actions No. of Actions Disposed

Year Pending cases
Initiated on provision of law (Aggregate Disposal)
1995-96 0.00 0.00 0.00

1996-97 0.06 0.08 0.00
1997-98 1.77 2.17 0.21
1998-99 1.06 1.33 0.00
1999-00 1.73 2.17 0.00
2000-01 9.61 11.40 2.57
2001-02 9.19 11.54 0.00
2002-03 6.69 7.79 2.36
2003-04 14.86 17.21 5.65
2004-05 10.88 13.13 2.05
2005-06 4.09 5.13 0.00
2006-07 8.38 9.26 4.93
2007-08 7.80 7.93 7.29
2008-09 1.56 1.96 0.00
2009-10 7.84 5.57 16.74
2010-11 7.21 3.06 23.51
2011-12 7.25 0.26 34.70
Total 100.00 100.00 100.00
131
Figure 4.5: Age-wise Analysis of Enforcement Actions - U/S 11, 11B and 11D of
SEBI ACT during March 31, 1995 to March 31, 2012155
45
40
35
30
25
20
15
10
No.of Actions No. of Actions Disposed (Aggregate Disposal) Pending cases

Initiated
As is shown in the tables 4.9, 4.10, and figure 4.5, in 2003-2004 Number of Actions
Initiated and Aggregate Disposal reached their peak at 14.86 and 17.2 respectively.
Pending Cases attained its highest amount in 2011-12, at 34.70.
155
Ibid
132
II. Enquiry Proceedings
SEBI can suspend or nullify the certificate of registration of an intermediary through
Enquiry Regulations recommended by the enquiry officer or any appointed authority for
that purpose or issue warning when it deems that the perpetrated violation does not
authorize suspension or cancellation or registration. Table 4.11 provides an age-based
analysis of the enquiry proceedings during the time span of March 31, 1995 to March 31,
2012.
Table 4.11: A Year-wise Analysis of Enforcement Actions - Enquiry Proceedings
during March 31, 1995 to March 31, 2012

No. of Actions
Pending cases
Initiated
Year
Aggregate
Disposal
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
1995-96 8 8 0 8 0
1996-97 20 1 12 7 0 20 0
1997-98 66 3 48 7 5 1 2 0 66 0
1998-99 335 48 116 12 154 2 3 0 335 0
1999-00 69 27 1 18 19 1 1 0 67 2
2000-01 267 6 33 204 6 9 2 1 5 0 266 1
2001-02 204 35 83 49 16 11 4 6 0 204 0
2002-03 371 141 56 27 27 60 20 16 4 14 6 371 0
2003-04 476 21 71 115 82 83 28 48 14 8 470 6
133
No. of Actions
Pending cases
Initiated
Year
Aggregate
Disposal
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
2004-05 190 3 17 3 57 70 30 10 0 190 0
2005-06 80 9 31 19 8 13 0 80 0
2006-07 122 4 8 28 22 27 20 109 13
2007-08 89 3 11 8 14 4 40 49
2008-09 20 4 3 1 8 12
2009-10 23 1 5 0 6 17
2010-11 24 8 1 9 15
2011-12 8 0 0 8
Total 2,372 0 9 15 103 150 24 87 603 134 127 172 164 216 172 125 108 40 2,249 123
According to table 4.11, 40 cases were disposed by SEBI in financial year 2011-12 after
the due completion of enquiry proceedings. In the very financial year, 8 new cases were
initiated when enquiry proceedings are being conducted. The total cases pending on
March 31, 2012 reached to 123. Altogether, table 4.11 indicates that about 5% of the
action initiated are pending.
For the ease of analysis table 4.11 is represented in percentage, below:
134
Table 4.12: Percentage of year-wise Analysis of Enforcement Actions - Enquiry
Proceedings during March 31, 1995 to March 31, 2012
No. of Actions No. of Actions Disposed (Aggregate

Year Pending Cases
Initiated Disposal)
1995-96 0.34 0.36 0.00
1996-97 0.84 0.89 0.00
1997-98 2.78 2.93 0.00
1998-99 14.12 14.90 0.00
1999-00 2.91 2.98 1.63
2000-01 11.26 11.83 0.81
2001-02 8.60 9.07 0.00
2002-03 15.64 16.50 0.00
2003-04 20.07 20.90 4.88
2004-05 8.01 8.45 0.00
2005-06 3.37 3.56 0.00
2006-07 5.14 4.85 10.57
2007-08 3.75 1.78 39.84
2008-09 0.84 0.36 9.76
2009-10 0.97 0.27 13.82
2010-11 1.01 0.40 12.20
2011-12 0.34 0.00 6.50
Total 100.00 100.00 100.00
135
Figure 4.6: The Year-wise Analysis of Enforcement Actions - Enquiry Proceedings
during March 31, 1995 to March 31, 2012 156
50
45
40
35
30
25
20
15
10
No.of Actions No. of Actions Disposed (Aggregate Disposal) Pending Cases

Initiated
As tables 4.11, 4.12, and figure 4.6 indicate the Number of Actions Initiated and
Aggregate Disposal reached their peak in 2003-2004 at 20.07 and 20.90, respectively.
The highest amount for Pending Cases is shown in 2007-08 at 39.84.
156
Where it was impossible to merge some numbers, no chart could be drawn for those numbers.
136
III. Adjudication Proceedings
According to Chapter VIA of SEBI Act, 1992, SEBI can designate an Adjudicating
Officer for exercising enquiries and specifying penalties. Table 4.13 shows the year-wise
analysis of adjudication proceedings during March 31, 1995 to March 31, 2012.
Table 4.13: Year-wise Analysis of Enforcement Actions - Adjudication Proceedings

No. of Actions
Pending cases
Initiated
Aggregate
Disposal
Year
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
1995-96 2 1 1 2 0
1996-97 5 1 2 1 1 5 0
1997-98 16 3 2 1 1 7 2 16 0
1998-99 33 2 7 1 1 1 8 2 1 2 25 8
1999-00 32 9 7 3 2 4 2 2 3 32 0
2000-01 77 4 17 1 6 8 5 4 5 23 0 4 77 0
2001-02 64 16 14 4 14 2 6 5 1 1 63 1
2002-03 150 10 11 62 19 15 8 6 3 5 0 139 11
2003-04 577 52 344 55 66 8 27 9 3 0 564 13
2004-05 418 8 137 126 45 28 17 21 23 2 407 11
2005-06 283 27 47 22 66 23 56 10 251 32
2006-07 578 34 82 102 120 106 18 462 116
2007-08 1215 4 20 152 373 295 47 891 324
2008-09 546 70 101 255 42 468 78
2009-10 644 114 229 121 464 180
2010-11 571 284 257 541 30
2011-12 609 143 143 446
Total 5820 0 0 1 6 9 16 43 29 85 581 242 218 181 473 764 1,257 645 4,550 1,270
Table 4.13 shows SEBI‘s disposing 645 cases in 2011-2012, and initiating 609 new cases
in the same year under adjudicating proceedings. The total cases pending reached to
137
1,270 on March 31, 2012. From the total number of 5820 actions initiated, 4550 actions
are disposed and 1270 are among pending cases.
For the ease of analysis the above findings are shown in percentage in table 4.14,
below:
Table 4.14: Percentage of Year-wise Analysis of Enforcement Actions -
Adjudication Proceedings during March 31, 1995 to March 31, 2012

Year Pending Cases
Initiated (Aggregate Disposal)
1995-96 0.03 0.04 0.00
1996-97 0.09 0.11 0.00
1997-98 0.27 0.35 0.00
1998-99 0.57 0.55 0.64
1999-00 0.55 0.70 0.00
2000-01 1.32 1.69 0.00
2001-02 1.10 1.38 0.08
2002-03 2.58 3.05 0.88
2003-04 9.91 12.40 1.04
2004-05 7.18 8.95 0.88
2005-06 4.86 5.52 2.56
2006-07 9.93 10.15 9.28
2007-08 20.88 19.58 25.92
2008-09 9.38 10.29 6.24
2009-10 11.07 10.20 14.40
2010-11 9.81 11.89 2.40
2011-12 10.46 3.14 35.68
Total 100.00 100.00 100.00
138
Figure 4.7: Year-wise Analysis of Enforcement Actions - Adjudication Proceedings
during March 31,1995 to March 31, 2012 157
70
60
50
40
30
20
10

Initiated
Tables 4.13, 4.14, and figure 4.7 show that, Number of Actions Initiated and Aggregate
Disposal reached their peak respectively at 20.88 and 19.58 in 2007-008. Pending Cases
157
139
attained its highest amount of 35.68 in 2011-12 .All cases including those initiated,
disposed, and pending reached their peak number in 1995 to 2012 indicating the increase
in the number of the cases to be investigated, the process of investigating ,and hence the
number of the pending cases.
IV. Prosecution
Under Section 24 of the SEBI Act, 1992 SEBI is authorized to prosecute any individual
breaching any provision of the SEBI Act, 1992 or any rules or regulations made under it.
Table 4.15: Year-wise Analysis of Enforcement Actions - Prosecution Proceedings

No. of Actions
Initiated
Year
Aggregate
Disposal
Pending
cases
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
1995-96 9 1 1 1 3 6
1996-97 6 1 1 2 4
1997-98 8 1 1 1 3 5
1998-99 11 1 1 2 9
1999-00 25 1 1 1 3 22
2000-01 28 1 1 2 4 24
2001-02 95 3 4 4 1 2 14 81
2002-03 229 1 5 17 6 5 2 5 41 188
2003-04 480 1 5 29 29 5 15 15 33 132 348
2004-05 86 1 13 6 2 3 3 28 58
2005-06 30 3 2 1 6 24
141
No. of Actions
Year Initiated
Aggregate
Disposal
Pending
cases
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
2006-07 23 0 23
2007-08 40 1 1 2 38
2008-09 29 0 29
2009-10 30 0 30
2010-11 17 0 17
2011-12 29 0 29
Total 1,175 0 0 0 0 1 2 2 2 2 6 6 43 65 19 24 25 43 240 935
According to table 4.15, from the total number of 1175 cases initiated, the aggregate
number of disposed cased reached to 240 while 935 cases were hitherto pending.
Table 4.16: Percentage of Year-wise Analysis of Enforcement Actions - Prosecution
Proceedings during March 31, 1995 to March 31, 2012
No. of Actions No. of Actions Disposed Pending

Year
Initiated (Aggregate Disposal) Cases
1995-96 0.77 1.25 0.64
1996-97 0.51 0.83 0.43
1997-98 0.68 1.25 0.53
1998-99 0.94 0.83 0.96
1999-00 2.13 1.25 2.35
2000-01 2.38 1.67 2.57
2001-02 8.09 5.83 8.66
2002-03 19.49 17.08 20.11
2003-04 40.85 55.00 37.22
2004-05 7.32 11.67 6.20
2005-06 2.55 2.50 2.57
2006-07 1.96 0.00 2.46
141
No. of Actions No. of Actions Disposed Pending
Year
Initiated (Aggregate Disposal) Cases
2007-08 3.40 0.83 4.06
2008-09 2.47 0.00 3.10
2009-10 2.55 0.00 3.21
2010-11 1.45 0.00 1.82
2011-12 2.47 0.00 3.10
Total 100.00 100.00 100.00
Figure 4.8: Year-wise Analysis of Enforcement Actions - Prosecution Proceedings
during March 31, 1995-March 31, 2012158
140
120
100
80
60
40
20

Initiated
158
142
According to tables 4.15 and 4.16 and figure 4.8, in 2003-2004, the Number of Actions
Initiated and Aggregate Disposal reached their peak at 40.85 and 55 respectively. In the
same year, Pending Cases reached its highest amount of 37.22. It is revealing that while
SEBI‘s activity in this regard reached its peak in 2003-2004, it has not actually completed
any case in 2008 to 2012.
V. Summary Proceedings
Chapter VA of the SEBI (Intermediaries) Regulations, 2008 gives SEBI the authority of
conducting summary proceedings in specific cases. A year-wise analysis of summary
proceedings under SEBI Act during March 31, 1995 to March 31, 2012 can be found in
table 4.17, below:
Table 4.17: Year-wise Analysis of Enforcement Actions – Summary Proceedings
under SEBI Act during March 31, 1995 to March 31, 2012

No. of Actions
Pending Cases
Initiated
Aggregate
Year
Disposal
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
143
No. of Actions
Pending Cases
Initiated
Aggregate
Disposal
Year
1995-
1996-
1997-
1998-
1999-
2000-
2001-
2002-
2003-
2004-
2005-
2006-
2007-
2008-
2009-
2010-
2011-
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
2003-04 47 2 3 19 4 2 30 17
2004-05 0 0
2005-06 2,296 0 230 79 11 1,820 90 0 2,230 66
2006-07 1 1 1 0
2007-08 1 1 1 0
2008-09 91 91 91 0
2009-10 0 0 0
2010-11 0 0 0 0
2011-12 0 0 0 0
Total 2,436 0 0 0 0 0 0 0 0 0 0 0 232 82 11 1,932 94 2 2,353 83
As can be followed in table 4.17, two cases of summary proceedings were disposed by
SEBI in 2011-12, but no summary proceedings were initiated in 2011-12. The total
pending cases as on March 31, 2012 reached 83.
For the ease of analysis, table 4.17 is represented in percentage in table 4.18 as follows:
Table 4.18: Percentage of Year-wise Analysis of Enforcement Actions – Summary
Proceedings under SEBI Act During March 31, 1995 to March 31, 2012

Year Pending Cases
1995-96 0.00 0.00 0.00
1996-97 0.00 0.00 0.00
1997-98 0.00 0.00 0.00
1998-99 0.00 0.00 0.00
144
Year Pending Cases
1999-00 0.00 0.00 0.00
2000-01 0.00 0.00 0.00
2001-02 0.00 0.00 0.00
2002-03 0.00 0.00 0.00
2003-04 1.93 1.27 20.48
2004-05 0.00 0.00 0.00
2005-06 94.25 94.77 79.52
2006-07 0.04 0.04 0.00
2007-08 0.04 0.04 0.00
2008-09 3.74 3.87 0.00
2009-10 0.00 0.00 0.00
2010-11 0.00 0.00 0.00
2011-12 0.00 0.00 0.00
Total 100.00 100.00 100.00
145
Figure 4.9: Year-wise Analysis of Enforcement Actions – Summary Proceedings under
SEBI Act during March 31 to 1995-March 31, 2012159
100
80
60
40
20

Initiated
According to tables 4.17 and 4.18, and figure 4.8, in 2005-06, Number of Actions Initiate
and Aggregate Disposal reached their peak at 94.25 and 94.77, respectively. In the same
year, Cases pending attained its highest amount at 79.52; however SEBI‘s activity in
other years was insignificant and almost null.
4.3.2.2. Market Intermediaries
What follows in table 4.19 shows that SEBI initiated 609 Adjudication and eight Enquiry
Proceedings in 2011-12. Table 4.21 indicates that the total number of the orders passed or
159
Where it was impossible to merge some numbers, no chart could be drawn for those numbers
146
reports submitted during 2011-12 was 716, out of which 692 cases were Adjudication
Proceedings and 24 cases were Enquiry Related.
Table 4.19: Enquiry and Adjudication Proceedings Initiated during 2003-12
Particulars
Year
Enquiry Related Adjudications
2003-04 192 122
2004-05 30 29
2005-06 14 22
2006-07 14 38
2007-08 8 23
2008-09 20 106
2009-10 18 130
2010-11 20 83
2011-12 8 609
Total 324 1,162
Table 4.20: Percentage of Enquiry and Adjudication Proceedings Initiated during

2003-12
Particulars
Year
2003-04 59.26 10.50
2004-05 9.26 2.50
2005-06 4.32 1.89
2006-07 4.32 3.27
2007-08 2.47 1.98
2008-09 6.17 9.12
2009-10 5.56 11.19
2010-11 6.17 7.14
2011-12 2.47 52.41
Total 100.00 100.00
147
Figure 4.10: Percentage of Enquiry and Adjudication Proceedings Initiated during
2003-12
80
70
60
50
40
30
20
10
0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Tables 4.19, 4.20, and figure 4.10 show that the peak of Enquiry Related was in 2003-04,
while Adjudications reached their peak in 2011-12 when a frequency of 609 of cases
indicates the profound endeavor of the authority (SEBI) to fulfill the prosecutions of the
cases. The high number of Adjudication Proceedings in 2011-12 on one hand and the
high efficiency of SEI on the other hand have led to a significant decrease in the number
of the cases filed which in turn enhanced the public satisfaction.
148
Table 4.21: Enquiry and Adjudication during 2006-12
Orders Passed/Report Submitted

Year
Enquiry Adjudication
2006-07 0 0
2007-08 0 3
2008-09 7 201
2009-10 3 95
2010-11 0 13
2011-12 24 692
Total 34 1,004
Table 4.21 is represented in percentage in table 4.22.
Table 4.22: Percentage of Enquiry and Adjudication during 2006-12
Orders Passed/Report Submitted

Year
Enquiry Adjudication
2006-07 0.00 0.00
2007-08 0.00 0.30
2008-09 20.59 20.02

2009-10 8.82 9.46
2010-11 0.00 1.29
2011-12 70.59 68.92
Total 100.00 100.00
149
Figure 4.11: Percentage of Enquiry and Adjudication during 2006-12
25
20
15
10
0
Enquiry
Adjudication
2006-07 2007-08 2008-09 2009-10 2010-11
Based on the tables 4.21, 4.22 and figure 4.11, orders passed or reported submitted in
Enquiry and Adjudication, reached its peak in 2011-12 which is an evidence of SEBI‘s
high performance.
SEBI initiated enquiry and adjudication on other intermediaries such as registrars
to an issue & share transfer agents, merchant bankers, depository participants, and
debenture trustees. An account of these enquiry and adjudication proceedings SEBI
initiated on the abovementioned four intermediaries is provided in following tables which
express a rise in the SEBI‘s activity in investigating the enquiries.
151
Table 4.23: Enquiry Proceedings Initiated against other Intermediaries during
2004-12
Intermediaries
Years
Registrars to an Issue & Merchant Depository Debenture
Share Transfer Agents Bankers Participants Trustees
2004-05 0 5 9 0
2005-06 2 0 1 0
2006-07 0 0 0 0
2007-08 0 1 1 0
2008-09 1 0 0 0
2009-10 1 0 0 0
2010-11 0 0 0 0
2011-12 1 1 0 0
Total 5 7 11 0
Table 4.24: Percentage of Enquiry Proceedings Initiated against other
Intermediaries during 2004-12
Intermediaries
Years
2004-05 0.00 71.43 81.82 0.00
2005-06 40.00 0.00 9.09 40.00
2006-07 0.00 0.00 0.00 0.00
2007-08 0.00 14.29 9.09 0.00
2008-09 20.00 0.00 0.00 20.00
2009-10 20.00 0.00 0.00 20.00
2010-11 0.00 0.00 0.00 0.00
2011-12 20.00 14.29 0.00 20.00
Total 100.00 100.00 100.00 100.00
151
Figure 4.12: Percentage of Enquiry Proceedings Initiated against other
90
80
70
60
50
40
30
20
10
0
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
Registrars to an Issue & Share Transfer Agents

Merchant Bankers
Depository Participants
Debenture Trustees
According to tables 4.23, 4.24, and figure 4.12, the most cases of Enquiry were
conducted against Merchant Bankers and Depository Participants in 2004-05 which
descended to a sharp drop or a null in later years.
152
Table 4.25: Adjudication Proceedings Initiated against other Intermediaries during
2004-12
Intermediaries
Years
2004-05 4 0 3 0
2005-06 3 0 1 0
2006-07 0 5 6 0
2007-08 4 0 2 0
2008-09 3 2 0 0
2009-10 1 1 4 1
2010-11 0 2 0 2
2011-12 0 0 0 0
Total 15 10 16 3
For the ease of analysis, table 4.25 is represented in percentage as follows:
153
Table 4.26: Percentage of Adjudication Proceedings Initiated against other
Intermediaries
Years
2004-05 26.67 0.00 18.75 0.00

2005-06 20.00 0.00 6.25 0.00
2006-07 0.00 50.00 37.50 0.00
2007-08 26.67 0.00 12.50 0.00
2008-09 20.00 20.00 0.00 0.00
2009-10 6.67 10.00 25.00 33.33
2010-11 0.00 20.00 0.00 66.67
2011-12 26.67 0.00 18.75 0.00
Total 100.00 100.00 100.00 100.00
Figure 4.13: Percentage of Adjudication Proceedings Initiated against other
70
60
50
40
30
20
10
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Registrars to an Issue & Share Transfer Agents Merchant Bankers

Depository Participants Debenture Trustees
154
Table 4.25, 4.26, and figure 4.13 show that most cases of Adjudication were conducted
against Merchant Bankers and Depository Participants in 2006-2007.
SEBI has also issued warning, deficiency, or advice letters to other intermediaries
such as registrars to an issue & share transfer agents, merchant bankers, depository
participants, and debenture trustees, an account of which is provided in following tables.
SEBI has continuously tried to conduct proceeding adjudication. The most of
SEBI‘s adjudication proceedings initiated was against Registrars to an Issue & Share
Transfer Agents in 2004-2005 and 2007-2008.
Table 4.27: Warning/Deficiency/Advice Letters Issued by SEBI against Other
Intermediaries
Years
2004-05 0 0 0 0
2005-06 0 8 25 0
2006-07 0 1 17 0
2007-08 6 1 6 0
2008-09 2 0 2 0
2009-10 3 3 10 0
2010-11 6 2 15 2
2011-12 3 10 6 3
Total 20 25 81 5
155
Table 4.28: Percentage of Warning/Deficiency/Advice letters Issued against Other
Intermediaries
Years
2004-05 0.00 0.00 0.00 0.00

2005-06 0.00 32.00 30.86 0.00
2006-07 0.00 4.00 20.99 0.00
2007-08 30.00 4.00 7.41 0.00
2008-09 10.00 0.00 2.47 0.00
2009-10 15.00 12.00 12.35 0.00
2010-11 30.00 8.00 18.52 40.00
2011-12 15.00 40.00 7.41 60.00
Total 100.00 100.00 100.00 100.00
Figure 4.14: Percentage of Warning/Deficiency/Advice Letters Issued against Other
120
100
80
60
40
20
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
Debenture Trustees
Depository Participants
Merchant Bankers
Registrars to an Issue & Share Transfer Agents
156
Based on tables 4.27, 4.28, and figure 4.13, in the early years, the highest amount of
Warning/ Deficiency/Advice letters were issued to Merchant Bankers in 2005-06 which
experienced a sharp drop in later years, but finally reached its peak in 2011-12. The
Depository Participants showed the second highest amount in 2005-2006, but after a
partial decrease in the later years, finally increased again in 2010-11.
4.3.2.3. Prosecution
Section 24 of the SEBI Act, 1992, authorizes SEBI to initiate prosecution against any
individual violating any provision of the SEBI Act, 1992, in a court of justice.
4.3.2.3.1 Trends in Prosecution
I. Number of Prosecutions Launched
An account of the number of prosecutions launched as well as the number of
the persons or entities against whom the very prosecutions have been
launched during 1995 to 2012 is provided in table 4.29 as follows:
Table 4.29: Prosecutions Launched during 1995-2012
No. of cases in which No. of persons/ Entities against

Years Prosecution Has Been Whom Prosecution Has Been
Launched Launched
Up to and Including
1995 -1996 9 67
1996 -1997 6 46
1997 -1998 8 63
1998 -1999 11 92
157
Years Prosecution Has Been Whom Prosecution Has Been
Launched Launched
1999 -2000 25 154
2000 -2001 28 128
2001 -2002 95 512
2002 -2003 229 864
2003 -2004 480 2406
2004 -2005 86 432
2005 -2006 30 101
2006 -2007 23 152
2007 -2008 40 185
2008 -2009 29 114
2009 -2010 30 109
2010-2011 17 67
2011-2012 29 60
Total 1175 5552
For the ease of analysis table 4.29 is represented in percentage in table 4.30.
158
Table4.30: Percentage of Prosecutions Launched during 1995-2012

Years Prosecution Has been Whom prosecution has been
launched launched
Up to and including
1995 -1996 1.21 0.77
1996 -1997 0.83 0.51
1997 -1998 1.13 0.68
1998 -1999 1.66 0.94
1999 -2000 2.77 2.13
2000 -2001 2.31 2.38
2001 -2002 9.22 8.09
2002 -2003 15.56 19.49
2003 -2004 43.34 40.85
2004 -2005 7.78 7.32
2005 -2006 1.82 2.55
2006 -2007 2.74 1.96
2007 -2008 3.33 3.40
2008 -2009 2.05 2.47
2009 -2010 1.96 2.55
2010-2011 1.21 1.45
2011-2012 1.08 2.47
Total 100.00 100.00
159
Figure 4.15: Percentage of Prosecutions Launched during 1995-2012
90
80
70
60
50
40
30
20
10
No. of Cases in Which No. of Persons/

Prosecution Has Been Entities against
Launched Whom Prosecution
Has Been Launched
Table 4.29, 4.30 and figure 4.15 indicate the prosecutions executed in the time span of
1995 to 2012. To start with, in 1995-96, 9 prosecution cases were launched against 67
persons/entities compared to 29 cases against 60 persons/entities in 2011-12; this simple
comparison reveals a partial increase in the prosecution cases which reached its peak in
2003-04.
161
II. Prosecutions Launched in Different Regions
An account of the number of prosecution cases launched in four different
regions, namely Head Office/Western Region, Northern Region, Southern
Region, and Eastern Region is provided in table 4.31 as follows:
Table 4.31: Region-wise Number of Prosecution Cases during 1996-2012
Particulars
Head
Years Northern Southern Eastern
Office/Western
Region Region Region
Region
1996 -1997 360 221 187 114
1997 -1998 46 18 21 26
1998 -1999 29 10 09 10
1999 -2000 46 13 27 7
2000 -2001 43 10 89 9
2001 -2002 23 3 7 2
2002 -2003 13 1 9 3
2003 -2004 306 408 95 0
2004 -2005 465 322 105 77
2005 -2006 491 326 112 85
2006 -2007 502 326 112 86
2007 -2008 539 327 113 86
2008 -2009 556 337 114 86
2009 -2010 595 345 97 92
2010-2011 612 345 96 93
2011-2012 641 345 96 93

Total 5267 3357 1289 869
For the ease of analysis table 4.31 is represented in percentage in table 4.32.
161
Table 4.32: Percentage of Region-wise Number of Prosecution Cases a during 1996-
2012
Particulars
Head Office/Western Northern Southern Eastern

Years
Region Region Region Region
1996 -1997 6.84 6.58 14.51 13.12
1997 -1998 0.87 0.54 1.63 2.99
1998 -1999 0.55 0.30 0.70 1.15
1999 -2000 0.87 0.39 2.09 0.81
2000 -2001 0.82 0.30 6.90 1.04
2001 -2002 0.44 0.09 0.54 0.23
2002 -2003 0.25 0.03 0.70 0.35
2003 -2004 5.81 12.15 7.37 0.00
2004 -2005 8.83 9.59 8.15 8.86
2005 -2006 9.32 9.71 8.69 9.78
2006 -2007 9.53 9.71 8.69 9.90
2007 -2008 10.23 9.74 8.77 9.90
2008 -2009 10.56 10.04 8.84 9.90
2009 -2010 11.30 10.28 7.53 10.59
2010-2011 11.62 10.28 7.45 10.70
2011-2012 12.17 10.28 7.45 10.70
Total 100.00 100.00 100.00 100.00
162
Figure 4.16: Percentage of Region-wise Number of Prosecution Cases during 1996-
2012
2011-2012
2010-2011
2009 -2010
2008 -2009
2007 -2008 Eastern Region
2006 -2007
Southern Region
2005 -2006
Northern Region
2004 -2005
2003 -2004
Head Office/Western
Region
2002 -2003
2001 -2002
2000 -2001
1999 -2000
1998 -1999
1997 -1998
1996 -1997
0 5 10 15 20
163
The Head Office, Western Region had the highest number of violations and hence the
highest number of prosecutions launched, Compared to Northern Region, Southern
Region, and Eastern Region, (Table 4.31); the Western Region‘s having the highest
number of prosecution cases may be due to certain features of the region or its
population. According to table 4.32, in most years, 50 percent or more than 50 percent of
the violations and accordingly the prosecutions took place in Western Region, while the
least violations and prosecutions happened in Eastern Region.
The number of prosecution cases in Western Region has been added up by the one in the
Head Office which increased the due number; moreover, the Head Office has had a more
significant performance because of its regional and geographical features.
4.3.2.3.2. Nature of Prosecution
The numbers of prosecutions launched under various sections of different Acts, namely
Securities and Exchange Board of India Act, 1992; SEBI Act & Securities Contracts
(Regulation) Act, 1956; SEBI Act, SCRA & Companies Act; SEBI Act & Companies
Act; SEBI Act & Indian Penal Code; Companies Act, 1956; Securities Contracts
Regulation) Act,1956; Depositories Act, 1996; and Indian Penal Code are provided for
each year in the time span of March, 31, 2004 to March, 31, 2012 in table 4.33.
164
Table 4.33: Nature of Prosecutions Launched during March 31, 2004- March 31,
2012
Particulars
SEBI Act &

Securities and SEBI
Securities SEBI Act, SEBI Act Securities
Exchange Act & Companies Indian
Years Contracts SCRA & & Contracts Depositories
Board of India Indian Act, Penal
(Regulation) Companies Companies (Regulation) Act, 1996
Act, 1992 Penal 1956 Code
Act, 1956 Act Act Act,1956
(SEBI Act) Code
(SCRA)
on March
31, 2004
795 0 0 0 0 59 14 13 5
on March
31, 2005
875 0 0 0 0 60 16 13 5
on March
31, 2006
920 0 0 0 0 60 16 13 5
on March
31, 2007
930 0 0 0 0 62 16 13 5
on March
31, 2008
966 0 0 0 0 62 16 13 8
on March
31, 2009
992 0 0 0 0 64 16 13 8
on March
31, 2010
934 91 1 1 5 70 5 14 8
on March
31, 2011
951 91 1 1 5 70 5 14 8
on March
31, 2012
980 91 1 1 5 70 5 14 8
Total 8343 273273 3 3 3 3 15 15 577577 109 109 120 120 60 60
For the ease of analysis, table 4.33 is represented in percentage in table 4.34 that follows:
165
Table 4.34: Percentage of Nature of Prosecutions Launched during March 31, 2004-
March 31, 2012
Particulars
SEBI Act &

Securities and
Securities SEBI Act, SEBI Act SEBI Act Securities
Exchange Companies Indian
Contracts SCRA & & & Indian Contracts Depositories
Years Board of India Act, Penal
(Regulation) Companies Companies Penal (Regulation) Act, 1996
Act, 1992 1956 Code
Act, 1956 Act Act Code Act,1956
(SEBI Act)
(SCRA)
on March
31, 2004
9.53 0.00 0.00 0.00 0.00 10.23 12.84 10.83 8.33
on March
31, 2005
10.49 0.00 0.00 0.00 0.00 10.40 14.68 10.83 8.33
on March
31, 2006
11.03 0.00 0.00 0.00 0.00 10.40 14.68 10.83 8.33
on March
31, 2007
11.15 0.00 0.00 0.00 0.00 10.75 14.68 10.83 8.33
on March
31, 2008
11.58 0.00 0.00 0.00 0.00 10.75 14.68 10.83 13.33
on March
31, 2009
11.89 0.00 0.00 0.00 0.00 11.09 14.68 10.83 13.33
on March
31, 2010
11.20 33.33 33.33 33.33 33.33 12.13 4.59 11.67 13.33
on March
31, 2011
11.40 33.33 33.33 33.33 33.33 12.13 4.59 11.67 13.33
on March
31, 2012
11.75 33.33 33.33 33.33 33.33 12.13 4.59 11.67 13.33
Total 100.00 100.00

100.00 100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00 100.00
100.0
100.0
100.0
100.
100
1
166
Figure 4.17: Percentage of Nature of Prosecutions Launched during March 31,
2004- March 31, 2012
on March 31, 2012
on March 31, 2011
on March 31, 2010
on March 31, 2009
on March 31, 2008
on March 31, 2007
on March 31, 2006
on March 31, 2005
on March 31, 2004
0 5 10 15 20 25 30 35
Indian Penal Code Depositories Act, 1996
Securities Contracts (Regulation) Act,1956 Companies Act,

1956
SEBI Act & Indian Penal Code SEBI Act & Companies Act
SEBI Act, SCRA & Companies Act SEBI Act & Securities Contracts
(Regulation) Act, 1956 (SCRA)
Securities and Exchange Board of India
Act, 1992 (SEBI Act)
167
According to tables 4.33, 4.34, and figure 4.16, the violations and prosecutions filed by
SEBI reached its peak in 2009. The least numbers of prosecution cases were filed under
SEBI Act, SCRA & Companies Act, and SEBI Act & Companies Act. The highest
percentage in Figure 4.17, is related to Securities and Exchange Board of India Act, 1992
(SEBI Act) which indicates the importance of this act.
4.3.2.3.3. Disposal of Prosecution Cases
The prosecution cases in the courts may be either convicted, compounded (fully), abated,
dismissed/discharged, or withdrawn. The number of each type decided from March 31,
2010 to March 31, 2012 is provided in table 4.35 both in Collective Investment Schemes
(CIS) and Non-Collective Investment Schemes (Non-CIS) as follows:
Table 4.35: Number of Prosecution Cases Decided by the Courts (CIS) during
March 31, 2010- March 31, 2012
Type of Decision by the Courts(CIS)
Years
Compounded
Convictions Abated Dismissed/Discharged Withdrawn
(fully)160
on March 31, 2010 72 6 0 11 2
on March 31, 2011 85 7 0 21 2
on March 31, 2012 124 7 0 23 2
Total 281 20 0 55 6
For the ease of analysis table 4.35, is represented in percentage in table 4.36 .
160
There were 15 cases which were partly compounded i.e. some of accused were compounded
but the case against other accused was continued.
168
Table 4.36: Percentage of Prosecution Cases Decided by the Courts (CIS) during
March 31, 2010- March 31, 2012
Type of Decision by the Courts(CIS)
Years
Convictions Compounded (fully) Abated Dismissed/Discharged Withdrawn
on March 31, 2010 25.62 30.00 0 20.00 33.33
on March 31, 2011 30.25 35.00 0 38.18 33.33
on March 31, 2012 44.13 35.00 0 41.82 33.33
Total 100.00 100.00 100.00 100.00 100.00
Figure 4.18: Percentage of Prosecution Cases Decided by the Courts (CIS) during
March 31, 2010- March 31, 2012
45
40
35
30
25
20
15
10
5
0
on March 31, 2010

on March 31, 2011
on March 31, 2012
Convictions Compounded (fully) Abated Dismissed/Discharged Withdrawn
169
Based on tables 4.35, 4.36 and figure 4.18, the cases Convicted, Compounded, and
Dismissed/Discharged in CIS were regularly increasing during all the 3 years while the
cases Withdrawn and Abated showed no significant change.
Table 4.37: Number of Prosecution Cases Decided by the Courts (Non-CIS) during
March 31, 2010- March 31, 2012
Type of Decision by the Courts( Non-CIS)
Years
Compounded
(fully)
on March 31, 2010 7 48 4 19 1

on March 31, 2011 7 49 4 20 1
on March 31, 2012 7 51 4 21 1
Total 21 148 12 60 3
For the ease of analysis table 4.37, is represented in percentage in table 4.38.
Table 4.38: Percentage of Prosecution Cases Decided by the Courts (Non-CIS)
during March 31, 2010- March 31, 2012
Type of Decision by the Courts (Non-CIS)
Years
Compounded
(fully)
on March 31, 2010 33.33 32.43 33.33 31.67 33.33

on March 31, 2011 33.33 33.11 33.33 33.33 33.33
on March 31, 2012 33.33 34.46 33.33 35.00 33.33
Total 100 100 100 100 100
171
Figure 4.19: Percentage of Prosecution Cases Decided by the Courts (Non-CIS)
during March 31, 2010- March 31, 2012
35
34.5 Convictions
34
33.5 Compounded (fully)

33
32.5
Abated
32
31.5
Dismissed/Discharged
31
30.5
30 Withdrawn
on March 31, 2010 on March 31, 2011 on March 31, 2012
Based on tables 4.37, 4.38, and figure 4.19, cases Dismissed/Discharged and
Compounded in Non-CIS were increasing every year from 2010 while those Convicted,
Abated, and Withdrawn showed no significant change during 3 years.
4.3.2.4. Litigations, Appeals, and Court Pronouncements
The following tables provide information on the court cases, Filed, Pending, and
Admitted/ Allowed/Withdrawn, where SEBI was involved as a party in a time span of
2002 to 2012.
171
Table 4.39: Court Cases Filed, Where SEBI Was a Party during 2002-12
Subject Matter
Years
Surveillance Department
Consumer Forum Cases
Registration Fees Cases
Collective Investment
Civil/Criminal Courts
Company Law Board

Secondary Market
Enforcement And
Depositories And
General Services
Primary Market
Stock Brokers
Investigations
Mutual Funds
Policy/Others
Department
Department
Department
Participants
Takeovers
RTI cases
Schemes
OIAE
2002 -2003 3 20 9 3 48 35 7 14 6 1 0 0 0 0 0
2003 -2004 0 5 16 5 46 21 23 3 6 1 0 0 0 0 0
2004 -2005 78 4 0 3 120 0 36 9 6 3 0 0 0 0 0
2005 -2006 15 3 14 5 12 10 245 7 0 1 0 0 0 0 0
2006 -2007 27 0 15 0 30 27 16 1 2 2 3 0 0 0 0
2007 -2008 23 3 16 2 84 14 12 3 2 0 1 7 4 0 0
2008 -2009 0 4 40 3 4 7 12 16 0 0 20 16 0 0 0
2009 -2010 13 2 28 8 2 9 19 17 1 5 6 18 8 0 0
2010-2011 3 55 14 9 60 14 12 19 0 3 1 2 16 1 7
2011-2012 2 25 11 1 36 15 4 16 0 1 5 15 17 0 1
Total 164 121 163 39 442 152 386 105 23 17 36 58 45 1 8
172
Table 4.40: Percentage of Court Cases Filed, Where SEBI Was a Party during 2002-
12
Subject Matter
Years
Company Law Board

Secondary Market
Enforcement And
Depositories And
General Services
Primary Market
Stock Brokers
Investigations
Mutual Funds
Policy/Others
Department
Department
Department
Participants
Takeovers
RTI cases
Schemes
OIAE
2002 -2003 1.83 16.53 5.52 7.69 10.86 23.03 1.81 13.33 26.09 5.88 0.00 0.00 0.00 0.00 0.00
2003 -2004 0.00 4.13 9.82 12.82 10.41 13.82 5.96 2.86 26.09 5.88 0.00 0.00 0.00 0.00 0.00
2004 -2005 47.56 3.31 0.00 7.69 27.15 0.00 9.33 8.57 26.09 17.65 0.00 0.00 0.00 0.00 0.00
2005 -2006 9.15 2.48 8.59 12.82 2.71 6.58 63.47 6.67 0.00 5.88 0.00 0.00 0.00 0.00 0.00
2006 -2007 16.46 0.00 9.20 0.00 6.79 17.76 4.15 0.95 8.70 11.76 8.33 0.00 0.00 0.00 0.00
2007 -2008 14.02 2.48 9.82 5.13 19.00 9.21 3.11 2.86 8.70 0.00 2.78 12.07 8.89 0.00 0.00
2008 -2009 0.00 3.31 24.54 7.69 0.90 4.61 3.11 15.24 0.00 0.00 55.56 27.59 0.00 0.00 0.00
2009 -2010 7.93 1.65 17.18 20.51 0.45 5.92 4.92 16.19 4.35 29.41 16.67 31.03 17.78 0.00 0.00
2010-2011 1.83 45.45 8.59 23.08 13.57 9.21 3.11 18.10 0.00 17.65 2.78 3.45 35.56 100.00 87.50
2011-2012 1.22 20.66 6.75 2.56 8.14 9.87 1.04 15.24 0.00 5.88 13.89 25.86 37.78 0.00 12.50
Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
173
Figure 4.20: Percentage of Court Cases Filed, Where SEBI Was a Party during
2002-12
RTI cases
Company Law Board
Policy/Others
OIAE 2011-2012
2010-2011
Mutual Funds
2009-2010
Depositories And 2008-2009

Participants
2007-2008
Takeovers 2006-2007
2005-2006
Secondary Market
Department 2004-2005
Primary Market 2003-2004

Department
2002 -2003
General Services
Department
Schemes
Stock Brokers
0 20 40 60 80 100
174
According to tables 4.39, 4.40, and figure 4.20, the most cases filed came under
Investigations Enforcement And Surveillance Department in 2004-05, and Secondary
Market Department in 2005-06, while the least cases filed came under Company law
Board and RTI Cases. In other words, the Investigations Enforcement and Surveillance
Department, and Stock Brokers Registration Fees Cases had the most and RTI had the
least activity in the cases filed.
Table 4.41: Court Cases Pending, Where SEBI Was a Party during 2002-12
Subject Matter
Years
Consumer Forum
Depositories And
Registration Fees
General Services
Primary Market
Company Law
Civil/Criminal
Stock Brokers
Investigations
Mutual Funds
Policy/Others
Enforcement
Surveillance
Department
Department
Department
Department
Participants
Investment
Secondary
Takeovers
Collective
RTI cases
Schemes
Market
Courts
Board
OIAE
Cases
Cases
And
2002 -2003 55 20 9 4 48 70 78 29 5 17 0 0 0 0 0
2003 -2004 42 22 16 7 37 44 87 24 6 18 0 0 0 0 0
2004 -2005 81 26 5 9 103 8 160 89 6 5 0 0 0 0 0
2005 -2006 102 33 18 10 30 49 372 50 0 19 0 0 0 0 0
2006 -2007 106 25 25 6 34 46 104 23 2 15 23 0 0 0 0
2007 -2008 33 23 33 1 82 37 53 53 1 11 3 7 24 0 0
2008 -2009 35 29 89 9 6 7 12 11 0 0 20 51 0 0 0
2009 -2010 23 33 111 8 20 39 143 30 2 6 56 61 18 0 0
2010-2011 87 124 182 13 125 48 67 35 2 17 31 59 62 4 14
2011-2012 74 108 117 25 101 41 71 39 0 24 50 104 116 7 16
Total 638 443 605 92 586 389 1,147 383 24 132 183 282 220 11 30
175
Table 4.42: Percentage of Court Cases Pending, Where SEBI Was a Party during
2002-12
Subject Matter
Years
Company Law Board

Secondary Market
Enforcement And
Depositories And
General Services
Primary Market
Stock Brokers
Investigations
Mutual Funds
Policy/Others
Department
Department
Department
Participants
Takeovers
RTI cases
Schemes
OIAE
2002 -2003 8.62 4.51 1.49 4.35 8.19 17.99 6.80 7.57 20.83 12.88 0.00 0.00 0.00 0.00 0.00
2003 -2004 6.58 4.97 2.64 7.61 6.31 11.31 7.59 6.27 25.00 13.64 0.00 0.00 0.00 0.00 0.00
2004 -2005 12.70 5.87 0.83 9.78 17.58 2.06 13.95 23.24 25.00 3.79 0.00 0.00 0.00 0.00 0.00
2005 -2006 15.99 7.45 2.98 10.87 5.12 12.60 32.43 13.05 0.00 14.39 0.00 0.00 0.00 0.00 0.00
2006 -2007 16.61 5.64 4.13 6.52 5.80 11.83 9.07 6.01 8.33 11.36 12.57 0.00 0.00 0.00 0.00
2007 -2008 5.17 5.19 5.45 1.09 13.99 9.51 4.62 13.84 4.17 8.33 1.64 2.48 10.91 0.00 0.00
2008 -2009 5.49 6.55 14.71 9.78 1.02 1.80 1.05 2.87 0.00 0.00 10.93 18.09 0.00 0.00 0.00
2009 -2010 3.61 7.45 18.35 8.70 3.41 10.03 12.47 7.83 8.33 4.55 30.60 21.63 8.18 0.00 0.00
2010-2011 13.64 27.99 30.08 14.13 21.33 12.34 5.84 9.14 8.33 12.88 16.94 20.92 28.18 36.36 46.67
2011-2012 11.60 24.38 19.34 27.17 17.24 10.54 6.19 10.18 0.00 18.18 27.32 36.88 52.73 63.64 53.33
Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
176
Figure 4.21: Percentage of Court Cases Pending, Where SEBI Was a Party during
2002-12
RTI cases
Company Law Board
Policy/Others
OIAE
Mutual Funds
2011-2012
2010-2011
Depositories And
Participants 2009-2010
2008-2009
Takeovers 2007-2008
2006-2007
Secondary Market 2005-2006
Department
2004-2005
2003-2004
Primary Market
Department 2002 -2003
Investigations
Enforcement And
General Services
Department
Schemes
Stock Brokers
0 10 20 30 40 50 60 70
177
Tables 4.41, 4.42, and figure 4.21 show that the most cases pending came under Stock
Brokers Registration Fees Cases; Consumer Forum Cases; and Investigations
Enforcement and Surveillance Department, while the least cases pending came under
Depository and Participants and Company Law Board.
Table 4.43: Court Cases Admitted/ Allowed/Withdrawn, Where SEBI Was a Party
during 2002-12
Subject Matter
Years
Company Law Board

Secondary Market
Enforcement And
Depositories And
General Services
Primary Market
Stock Brokers
Investigations
Mutual Funds
Policy/Others
Surveillance
Department
Department
Department
Department
Participants
Takeovers
RTI cases
Schemes
OIAE
2002 -2003 85 0 0 1 2 4 6 5 1 0 0 0 0 0 0
2003 -2004 11 3 0 0 9 0 12 1 0 0 0 0 0 0 0
56
2004 -2005 0 1 1 2 Dismissed; 2 3 6 0 0 0 0 0 0 0
1 Allowed
2005 -2006 18 0 0 3 11 18 24 1 0 6 0 0 0 0 0
2006 -2007 2 0 6 2 21 6 225 0 0 2 0 0 0 0 0
2007 -2008 18 0 5 1 52 6 4 3 2 1 1 0 0 0 0
2008 -2009 0 4 3 0 2 1 7 5 0 0 2 1 0 0 0
2009 -2010 15 5 15 10 1 9 11 16 0 1 0 15 2 0 0
2010-2011 3 9 1 2 24 6 11 13 0 0 2 1 7 1 7
2011-2012 5 28 28 0 46 16 9 15 1 4 5 7 15 0 0
Total 157 50 59 21 169 68 312 65 4 14 10 24 24 1 7
For the ease of analysis, table 4.43 is represented in table 4.44 as follows:
178
Table 4.44: Percentage of Court Cases Admitted/ Allowed/ Withdrawn, Where
SEBI Was a Party during 2002-12
Subject Matter
Years
Company Law Board

Secondary Market
Enforcement And
Depositories And
General Services
Primary Market
Stock Brokers
Investigations
Mutual Funds
Policy/Others
Department
Department
Department
Participants
Takeovers
RTI cases
Schemes
OIAE
2002 -2003 54.14 0.00 0.00 4.76 1.18 5.88 1.92 7.69 25.00 0.00 0.00 0.00 0.00 0.00 0.00
2003 -2004 7.01 6.00 0.00 0.00 5.33 0.00 3.85 1.54 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2004 -2005 0.00 2.00 1.69 9.52 0.59 2.94 0.96 9.23 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2005 -2006 11.46 0.00 0.00 14.29 6.51 26.47 7.69 1.54 0.00 42.86 0.00 0.00 0.00 0.00 0.00
2006 -2007 1.27 0.00 10.17 9.52 12.43 8.82 72.12 0.00 0.00 14.29 0.00 0.00 0.00 0.00 0.00
2007 -2008 11.46 0.00 8.47 4.76 30.77 8.82 1.28 4.62 50.00 7.14 10.00 0.00 0.00 0.00 0.00
2008 -2009 0.00 8.00 5.08 0.00 1.18 1.47 2.24 7.69 0.00 0.00 20.00 4.17 0.00 0.00 0.00
2009 -2010 9.55 10.00 25.42 47.62 0.59 13.24 3.53 24.62 0.00 7.14 0.00 62.50 8.33 0.00 0.00
100. 100.0
2010-2011 1.91 18.00 1.69 9.52 14.20 8.82 3.53 20.00 0.00 0.00 20.00 4.17 29.17
00 0
2011-2012 3.18 56.00 47.46 0.00 27.22 23.53 2.88 23.08 25.00 28.57 50.00 29.17 62.50 0.00 0.00
Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
179
Figure 4.22: Percentage of Court Cases Admitted/Allowed/Withdrawn, Where SEBI
Was a Party during 2002-12
RTI cases
Company Law Board
Policy/Others
OIAE
Mutual Funds 2011-2012

2010-2011
Depositories And
Participants 2009-2010
2008-2009
Takeovers 2007-2008
2006-2007
Secondary Market
2004-2005
Primary Market
2002 -2003
General Services
Department
Schemes
Stock Brokers
0 20 40 60 80 100
181
According to tables 4.43, 4.44, and figure 4.22, the most cases
Admitted/Allowed/Withdrawn came under Secondary Market Department; Investigations
Enforcement and Surveillance Department; and Stock Brokers Registration Fees Cases,
while the least cases Admitted/ Allowed/Withdrawn came under Depositories and
Participants; and Company Law Board.
4.3.2.5. Securities Appellate Tribunal (SAT)
The following tables elaborate on the performance of the Securities Appellate Tribunal in
the time span of 1997 to 2012 to clarify how this tribunal was efficient in its
performance, starting with 2 cases of appeals filed in 1997-98 and reaching to 247 cases
by the end of 2012.
Table 4.45: Appeals before the Securities Appellate Tribunal during 1997 -2012
Status of Appeals and Number of Appeals

Years Appeals
Appeals Appeals Appeals Appeals Appeals Appeals Appeals
Disposed as
Filed Dismissed Remanded Allowed Modified Withdrawn Pending
In fructuous
1997-98 2 0 0 0 0 0 0 2
1998-99 6 1 0 1 0 0 0 4
1999-00 8 2 0 3 0 0 0 0
2000-01 28 21 0 10 0 0 0 0
2001-02 54 20 03 11 0 0 0 20
2002-03 136 26 00 26 0 0 0 78
2003-04 175 31 5 13 0 0 0 126
2004-05 440 55 57 19 20 0 0 438
2005-06 244 92 97 55 37 0 0 401
2006-07 123 144 118 31 29 0 0 139
2007-08 203 69 12 52 29 6 8 138
2008-09 122 45 16 32 2 8 8 121
2009-10 361 155 56 36 33 14 8 80
2010-11 182 118 17 17 26 17 6 48
2011-12 247 90 14 44 51 16 1 80
Total 2331 869 395 350 227 61 31 1675
For the ease of analysis table 4.45 is represented in percentage in 4.46.
181
Table 4.46: Percentage of Appeals before the Securities Appellate Tribunal during
1997 -2012
Status of Appeals and Number of Appeals
Years
Appeals
Appeals Appeals Appeals Appeals Appeals Appeals Appeals
Disposed as
Filed Dismissed Remanded Allowed Modified Withdrawn Pending
In fructuous
1997-98 0.09 0.00 0.00 0.00 0.00 0.00 0.00 0.12
1998-99 0.26 0.12 0.00 0.29 0.00 0.00 0.00 0.24
1999-00 0.34 0.23 0.00 0.86 0.00 0.00 0.00 0.00
2000-01 1.20 2.42 0.00 2.86 0.00 0.00 0.00 0.00
2001-02 2.32 2.30 0.76 3.14 0.00 0.00 0.00 1.19
2002-03 5.83 2.99 0.00 7.43 0.00 0.00 0.00 4.66
2003-04 7.51 3.57 1.27 3.71 0.00 0.00 0.00 7.52
2004-05 18.88 6.33 14.43 5.43 8.81 0.00 0.00 26.15
2005-06 10.47 10.59 24.56 15.71 16.30 0.00 0.00 23.94
2006-07 5.28 16.57 29.87 8.86 12.78 0.00 0.00 8.30
2007-08 8.71 7.94 3.04 14.86 12.78 9.84 25.81 8.24
2008-09 5.23 5.18 4.05 9.14 0.88 13.11 25.81 7.22
2009-10 15.49 17.84 14.18 10.29 14.54 22.95 25.81 4.78
2010-11 7.81 13.58 4.30 4.86 11.45 27.87 19.35 2.87
2011-12 10.60 10.36 3.54 12.57 22.47 26.23 3.23 4.78
Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
182
Figure 4.23: Percentage of Appeals before the Securities Appellate Tribunal during 1997 -
2012
2011-12
2010-11
2009-10
2008-09
2007-08 Appeals Pending
Appeals Disposed as
2006-07 In fructuous
Appeals Withdrawn
2005-06 Appeals Modified
Appeals Allowed
2004-05
Appeals Remanded
2003-04
Appeals Dismissed
2002-03 Appeals Filed
2001-02
2000-01
1999-00
1998-99
1997-98
0 5 10 15 20 25 30
183
Based on tables 4.45, 4.46, and figure 4.23, the Securities Appellate Tribunal had the
most efficient performance in 2004-05 with the most cases of appeals filed and appeals
pending compared to other years. As it is shown above, Appeals Dismissed has the most
number while Appeals Disposed as Infructuous has the least numbers.
Some appeals were filed against the orders of Securities Appellate Tribunal both
by SEBI and against SEBI, an account of which can be found in following tables.
Table 4.47: Appeals Filed by SEBI under Section 15Z of the SEBI Act against the
Orders of SAT during 2001 -2012
Subject Matter
Years
Cases Filed Cases Pending Cases Dismissed/ Allowed
2001 -2002 07 07 0
2002 -2003 3 9 0
2003 -2004 7 18 1
2004 -2005 13 12 1
2005 -2006 10 7 3
2006 -2007 14 28 1
2007 -2008 15 25 2
2008 -2009 15 44 13
2009 -2010 29 81 8
2010-2011 5 58 2
2011-2012 11 65 4
Total 129 354 35
184
Table 4.48. Percentage of Appeals Filed by SEBI under Section 15Z of the SEBI Act
against the Orders of SAT during 2001-2012
Subject Matter
Years
2001 -2002 5.43 1.98 0.00
2002 -2003 2.33 2.54 0.00
2003 -2004 5.43 5.08 2.86
2004 -2005 10.08 3.39 2.86
2005 -2006 7.75 1.98 8.57
2006 -2007 10.85 7.91 2.86
2007 -2008 11.63 7.06 5.71
2008 -2009 11.63 12.43 37.14
2009 -2010 22.48 22.88 22.86
2010-2011 3.88 16.38 5.71
2011-2012 8.53 18.36 11.43
Total 100.00 100.00 100.00
185
Figure 4.24: Percentage of Appeals Filed by SEBI under Section 15Z of the SEBI Act
against the Orders of SAT during 2001-2012
40
35
30
25
20
15
10
Based on tables 4.47, 4.48, and figure 4.24, there were lots of Cases Pending and
accordingly Cases Filed had a very slow increase.
186
Table 4.49: Appeals Filed against SEBI under Section 15Z of the SEBI Act against
the Orders of SAT during 2001-12
Subject Matter
years
2001 -2002 08 05 03
2002 -2003 2 2 0
2003 -2004 5 6 0
2004 -2005 12 10 2
2005 -2006 2 1 1
2006 -2007 31 34 2
2007 -2008 29 23 17
2008 -2009 18 35 15
2009 -2010 75 82 99
2010-2011 51 50 35
2011-2012 24 57 4
Total 257 305 178
187
Table 4.50: Percentage of Appeals Filed against SEBI under Section 15Z of the
SEBI Act against the Orders of SAT during 2001-12
Subject Matter
Years
2001 -2002 3.11 1.64 1.69
2002 -2003 0.78 0.66 0.00
2003 -2004 1.95 1.97 0.00
2004 -2005 4.67 3.28 1.12
2005 -2006 0.78 0.33 0.56
2006 -2007 12.06 11.15 1.12
2007 -2008 11.28 7.54 9.55
2008 -2009 7.00 11.48 8.43
2009 -2010 3.11 1.64 1.69
2010-2011 0.78 0.66 0.00
2011-2012 1.95 1.97 0.00
Total 100.00 100.00 100.00
188
Figure 4.25: Percentage of Appeals Filed against SEBI under Section 15Z of the
SEBI Act against the Orders of SAT during 2001-12
30.00
25.00
20.00
15.00
10.00
5.00
0.00
Compared to tables and figure on Appeals Filed by SEBI, the above tables and figures on
Appeals Filed against SEBI followed the same trend in Cases Pending, but is more
productive in Cases Dismissed/Allowed.
Some appeals to SAT filed by SEBI or against SEBI were disposed. An account
of the Disposals of appeals, whether Dismissed, Modified, Withdrawn, or Allowed by
SAT in the time span of 1998 t0 2011, is given in the tables that follow. It can be
suggested that the main reason behind the decrease in the number of the appeals against
SEBI has been the proper observance and enforcement of the SEBI‘s rules and
189
regulations which scantly lessened the number of the cases of violation of SEBI‘s rules
and regulations.
Table 4.51: Disposals of Appeals by SAT during 1998-2011
Appeals
Years No. of Appeals No. of Appeals No. of Appeals No. of Appeals

Dismissed Modified Withdrawn Allowed
1998 1 0 0 1
1999 2 0 0 2
2000 7 1 0 6
2001 20 7 3 8
2002 15 NA161 2 23
2003 16 10 1 13
2004 29 58 8 19
2005 46 101 NA 72
2006 139 16 NA 71
2007 40 27 NA 32
2008 81 1 17 39
2009 86 19 19 30
2010 134 45 29 77
2011 90 51 16 44
Total 706 336 95 437
161
Not Available
191
Table 4.52: Percentage of Disposals of Appeals by SAT during 1998-2011
Appeals
Years No. of Appeals No. of Appeals No. of Appeals No. of Appeals

Dismissed Modified Withdrawn Allowed
1998 0.14 0.00 0.00 0.23
1999 0.28 0.00 0.00 0.46
2000 0.99 0.30 0.00 1.37
2001 2.83 2.08 3.16 1.83
2002 2.12 0.00 2.11 5.26
2003 2.27 2.98 1.05 2.97
2004 4.11 17.26 8.42 4.35
2005 6.52 30.06 0.00 16.48
2006 19.69 4.76 0.00 16.25
2007 5.67 8.04 0.00 7.32
2008 11.47 0.30 17.89 8.92
2009 12.18 5.65 20.00 6.86
2010 18.98 13.39 30.53 17.62
2011 12.75 15.18 16.84 10.07
Total 100.00 100.00 100.00 100.00
191
Figure 4.26: Percentage of Disposals of Appeals by SAT during 1998-2011
90
80
70
60
50
40
30
20
10
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
No. of Appeals Dismissed No. of Appeals Modified

No. of Appeals Withdrawn No. of Appeals Allowed
Based on tables 4.51, 4.52, and figure 4.26, Appeals Dismissed with its peak in 2006 and
Appeals Allowed with its peak in 2010 are respectively of the first and second frequency
192
among all cases disposed by SAT. Considering the descending trend in different types of
appeals, it can be deduced that the performance of SEBI has been enhanced yearly, which
has led to decrease in the cases of appeals.
4.3.3. Market Surveillance
Since the foundation of the SEBI‘s market surveillance division in July 1995,162 many
measures have been taken both by SEBI and stock exchange to improve the monitoring
of markets and detect market misappropriation. Some of these measures are as follows:
1. Founding an independent surveillance departments which work under the
executive directors of the stock exchanges;
2. SEBI‘s receiving all the stock exchanges‘ settlement records and pre-issue
monitoring accounts in a format determined by SEBI;
3. Applying the system of circuit breakers/filter procedures to all stock exchanges;
4. Applying the system of imposing certain penal margins;
5. Exercising the procedures for the stock exchanges‘ cooperation on suspensions
related to markets;
Market surveillance systems were strengthened during 1996-97;163 some of the related
developments are discussed later.
4.3.3.1. Formation of the Inter Exchange Market Surveillance Group
Stock exchanges had different ways of trading and settlement cycles and on the other
hand the scrip of these stock exchanges had various listings; all in all they end to irregular
162
This market was found in 1992, but formally started its activity in 1995.
163
193
variations in their trading. So, to improve the practice of markets, the urge for an
effective coordination between the stock exchanges was felt. In September 1996, an Inter
Exchange Market Surveillance Group was found to develop an effective cooperation
between the exchanges as to surveillance issues. SEBI managed meetings of the group
wherein was discussed ―the implementation of weekly caps, daily price bands, apart from
deliberating on the market trends and other related issues.‖164 The members of this group
include Representatives of Mumbai, Calcutta, Delhi, and Bangalore and Jaipur stock
exchanges.
4.4. Present Disclosure Standards in India
4.4.1. India’s Focus on Investor Protection
Investor protection is a significant segment of a developed financial investment. It aims at
confirming that investors are well-aware of their purchases, transactions, and the situation
of the company wherein they have invested.165
India‘s financial watchdogs as India‘s Central Bank; The Reserve Bank of India;
as well as India‘s main market regulator, SEBI, have proved their independence in
different ways. Their measures have led to fundamental reforms enhancing the corporate
governance, making a safer capital markets and creating more trust in investors.166
Investor protection has been the primary objective of SEBI. It issued guidelines
for Disclosure and Investor Protection Guidelines in 2000 which had both negative and
164
165
http://www.tmu.ac.in/gallery/viewpointsdcip2013/pdf/track3/T-313.pdf
166
http://advisoranalyst.com/glablog/2010/04/19/indias-focus-on-investor-protection
194
positive results in practice. 167 SEBI has recently tried to eliminate entry and exit loads; it
has enforced a listing regulations that maintained the interests of minority shareholders
against the measures of those aimed at eliminating companies; It has also provided
guidelines to increase the disclosures and compulsory grading of Initial Public Offerings
(IPOs); and has also stressed on the companies‘ utilizing more independent directors in
the respective boards.
Among SEBI‘s initiatives is its managing to execute the disclosure of quarterly
financial results in spite of all resistance a decade ago. Recently to this, it added the
semiannual disclosure of balance sheets to restrict the possibility of any ―creative
accounting.‖
One more priority of SEBI is developing capital markets. SEBI‘s push to have
online exchanges instead of the shares on paper was one more influential measure to
develop security transactions. It also proposed short selling to boost liquidity and price
discovery followed by enhancing the mechanism of securities lending. New asset classes
and exchanges have been also introduced by SEBI to encourage a variety of
participations in capital markets.168
4.5. Power of SEBI to Take Punitive Preventive Measures
In the beginning, it was proposed that SEBI can be empowered to impose a Rs 25 crore
fine on fraudulent practices which was later, as per the suggestion of the Department of
Company Affairs (DCA), decreased to Rs 1 Crore for minor offenses. DCA proposed that
167
http://www.tmu.ac.in/gallery/viewpointsdcip2013/pdf/track3/T-313.pdf
168
195
rationalization of the penalty scheme as a Rs 25 crore penalty, regardless of the size of
the offense, would have offended the sentiment of the markets.
The graded penalty scheme has been implemented as the government assumed
that it would safeguard the interests of investors more than an ungraded penalty scheme.
This scheme was proposed as part of a redrafted cabinet proposal to amend the SEBI Act;
the proposal aimed at enabling SEBI to deal more efficiently with fraudulent practices
such as the one happened in April 2001. Finally, the penalty to minor offenses has been
reduced while the penalty for the proved fraudulent insider trading was kept unchanged at
the original Rs 25 crore.
DCA had also warned that empowering SEBI to both search and seize would lead
to an overlap of power. The Companies Act, 1956, already authorized DCA to investigate
the books and statements of companies. DCA was also entitled to entrust this power of
investigation to SEBI.
All the rise of penalties is to enhance the efficiency of monitoring and
surveillance mechanism and to restore the investor confidence in the capital market
which has been lost due to recent fraudulent practices.169
4.6. Role of SEBI for Redressal of Investor Grievances in India
4.6.1 Redressal of Investor Grievances
Investors may have grievance against different entities and bodies, namely grievances
against listed companies; grievances against stock brokers and depository participants;
169
http://articles.economictimes.indiatimes.com/2002-05-17/news/27356093_1_dca-lower-
penalty-sebi-act
196
grievances against other intermediaries; grievances against mutual funds; grievances
relating to brokers and sub-brokers; grievances against DPs, registrars, merchant bankers,
debenture trustee, banker to the issue; grievances against stock exchanges, depositories
and clearing and settlement organizations; grievances against derivative exchanges; and
grievances pertaining to other public issues.170
Various departments have been cooperating in following up the redressal of
grievances in recent years. To speed up the redressal of investors, SEBI has taken
different measures. SEBI has provided both an online and physical facilities for redressal
of the complaints. Since 2011, SEBI Complaints Redress System (SCORES) has been
providing an online chance for lodging the investors‘ grievances which can be traced
online till their closure. For those investors who have no familiarity or access to
SCORES, the physical form of lodging the complaint is also available; these complaints
will also be scanned and uploaded in SCORES for later processes.
A list will be provided of the name of companies mentioned in the complaints of
the investors. The specified companies will be monitored and required to answer the
complaints in the form of Action Taken Report (ATR), based on which the grievances
will be updated. In case the explanations provided by the companies are not sufficient,
due actions will be launched. Grievances on stock brokers and depository participants
are processed by concerned stock exchanges and depositories for redressal, and
supervised by the related department through the reports submitted by them. Grievances
on other intermediaries are received by them and are continuously supervised by
concerned department of SEBI which will take the due actions.171
170
http://www.sebi.gov.in/boardmeetings/135/investredressal.pdf
171
197
Dedicated investor helpline telephone numbers provide the investors with general
information on securities markets and how to file a grievance and which authority to
recourse to. In case the investors‘ grievance is not within the purview of SEBI, it will still
guide the investors in approaching the appropriate authority.172
The following tables show the performance of SEBI in receiving and redressing
the investors‘ grievance from 2005 to 2012.
Table 4.53: Year-wise Status of Investor Grievances Received and Redressed during
1991-12
Grievances Received Grievances Redressed

Financial Year
Year-wise Cumulative Year-wise Cumulative
1991-92 18,794 18,794 4,061 4,061
1992-93 110,317 129,111 22,946 27,007
1993-94 584,662 713,773 339,517 366,524
1994-95 516,080 1,229,853 351,842 718,366
1995-96 376,478 1,606,331 315,652 1,034,018
1996-97 217,394 1,823,725 431,865 1,465,883
1997-98 511,507 2,335,232 676,555 2,142,438
1998-99 99,132 2,434,364 127,227 2,269,665
1999-00 98,605 2,532,969 146,553 2,416,218
2000-01 96,913 2,629,882 85,583 2,501,801
172
198
Financial Year
Year-wise Cumulative Year-wise Cumulative
2001-02 81,600 2,711,482 70,328 2,572,129

2002-03 37,434 2,748,916 38,972 2,611,101
2003-04 36,744 2,785,660 21,531 2,632,632
2004-05 54,435 2,840,095 53,361 2,685,993
2005-06 40,485 2,880,580 37,067 2,723,060
2006-07 26,473 2,562,047 17,899 239,5895
2007-08 54,933 2,616,980 31,676 2,427,571
2008-09 57,580 2,674,560 75,989 2,503,560
2009-10 32,335 2,706,895 47,742 254,630
2010-11 56,670 2,763,565 66,552 2,612,854
2011-12 46,548 2,810,113 53,841 2,666,695
Total 3,155,119 45,554,927 3,016,759 39,032,101
Table 4.54: Percentage Year-Wise of Status of Investor Grievances Received and
Redressed during 1991-12
Financial Year Grievances Received Grievances Redressed
1991-92 0.60 0.13
1992-93 3.50 0.76
1993-94 18.53 11.25
1994-95 16.36 11.66

1995-96 11.93 10.46
1996-97 6.89 14.32
1997-98 16.21 22.43
199
Financial Year Grievances Received Grievances Redressed
1998-99 3.14 4.22

1999-00 3.13 4.86
2000-01 3.07 2.84
2001-02 2.59 2.33
2002-03 1.19 1.29
2003-04 1.16 0.71
2004-05 1.73 1.77
2005-06 1.28 1.23
2006-07 0.84 0.59
2007-08 1.74 1.05
2008-09 1.82 2.52
2009-10 1.02 1.58
2010-11 1.80 2.21
2011-12 1.48 1.78
Total 100.00 100.00
Figure 4.27: Percentage Year-Wise of Status of Investor Grievances Received and
Redressed during 1991-12
45
40
35
30
25
20
15
10
211
Tables 4.53, 4.54, and figure 4.27 show that Grievance Received reached its peak at
18.53 percent in 1993-94, and Grievance Redressed reached its peak at 22.43
percent in 1997-98. Comparing the year-wise amount of Grievance Received with
Grievance Redressed reveals that in the first five years, Grievance Redressed was
less that Grievance Received, while in the later years the Grievance Redressed
surpassed the Grievance Received.
The higher cases of the grievance redressed implies that SEBI has been always
concerned about resolving the dissatisfaction of the investors and gaining their trust.
4.6.2. Regulatory Action against Companies and Their Directors for Non-
redressal of Investor Grievances
Whenever SEBI‘s initiative measures for redressal of the investors‘ grievance was not
effective, it has embarked on further measures in the form of adjudication, directions,
prosecution, etc. As a result, during 2011-12, the following eleven companies and their
directors were denied any access to the securities market till they respond to all the
pending grievances of the investors. The list of the restricted companies is provided
below:
Table 4.55: Companies Restrained from Accessing the Securities Market during
2011-12
Sl No Name of the Company

1 Aashi Industries Ltd
2 AEC Enterprises Limited
3 Dharnendra Industries Ltd
4 Dharnendra Overseas Ltd
5 Enkay Texofood Industries Ltd
Kaleidoscope Films Ltd. (Formerly known as Gujarat Incatel Telecommunications Ltd. & Gujarat Investment
6
Castings Ltd.)
211
7 Indu Nissan Oxo Chemical Industries Ltd
8 Pankaj Agro Protinex Ltd
9 Pioneer Embroideries Ltd
10 Solid Carbide Tools Ltd
11 Toheal Pharmachem Ltd
SEBI has also penalized seven more companies through adjudication proceedings in the
same year as they did not redress the investors‘ grievances duly. As the satisfaction of the
investors was among the prime for SEBI, SEBI has penalized within its authority those
companies which did not take proper measures to redress the grievances of the investors.
The list of the penalized companies as well as the amount of the penalty is provided
below:
Table 4.56: Companies Penalized For Their Failure to Redress Investor Grievances
Sl.
Name of the Company Penalty Amount ( )
No.
1 ICES Software Ltd 30,000
2 Indu Nissan Oxo Chemical Industries Ltd 13,00,000
3 Pantaloon Retail (India) Ltd 5,00,000
4 Parsoli Corporation Ltd 1,00,000
5 Western India Shipyard Ltd 2,00,000
6 Jay Energy and S. Energies Ltd 45,00,000
4.6.3. Issuance of No-objection Certificate
The companies that increase their capital by public issue of securities are demanded to
deposit one percent of the issue amount with the specified stock exchange. If the
companies duly redress the investors‘ grievance received by SEBI, SEBI will issue a
212
Non-Objection Certificate (NOC). After SEBI‘s issuing No-objection Certificate, the
stock exchange can release the deposit. During 2011-12, SEBI issued NOC to 85
companies, denying issuing NOC to 47 companies because of the companies‘ failure in
redressal of the investors‘ grievance received by SEBI.
4.6.4. Shortages in the Existing Grievance Redressal System
An account of the existing shortages in the system of investor grievances is as follows:
1. No centralized database: Besides the database of The Office of Investor Assistance
and Education (OIAE), there are various grievances‘ databases at different divisions
and regional offices of SEBI. Lack of a centralized database is a burden in an
efficient monitoring of the redressal status of grievances at various divisions of
SEBI, and accordingly answering the investors‘ queries.
2. Delay in redressal: The step by step process of receiving the investor‘s grievance,
whether electronically or physically, recording it in SEBI‘s inward system, adding it
to OIAE‘s database, forwarding it to the respective division of SEBI, and the very
division‘s adding it anew to its database, cause a considerable delay before putting
the investors‘ received grievance into action. The redressal of grievances launched
after such a considerable lapse of time in physical transfer of documents may
sometimes result in irreparable losses.
3. Loss or misplacement of records: In the abovementioned process of transfer of
documents to various divisions and offices of SEBI and then to intermediaries, there
is a considerable chance of loss/misplacement of grievance files.
213
4. Storage: Since the foundation of SEBI, it has received more than 2.7 million
grievances, storage and maintenance of which is an immense task and in need of
large space.173
4.6.5. Improvements Planned
To improve the existing grievance redressal system, SEBI is utilizing a web-based
centralized mechanism called SCORES (SEBI Complaints Redress System) to upgrade
the investor grievance redressal mechanism. Some of the main features of this new
system are as follows:
1. SCORES is a centralized grievances tracking system for the entire SEBI.
2. Through SCORSE, investors from everywhere can file grievances against any of
the Regional Offices of SEBI.
3. Lodging the grievances as well as tracing it will be all executed in electronic
mode.
4. Action Taken Reports can be updated online.174
SCORES‘s working in online mode will save the time needed for processing the
grievance as the previous time consuming physical movements of grievances are no more
required; even the action of taken report by the company/intermediary will be provided
online.175
The grievance records and documents will no more be lost or misplaced as they
are always available in electronic mode. Introducing SCORES has also solved the
173
174
Ibid
175
http://pib.nic.in/archieve/eec/2011/booklet.pdf
214
problem of physical storage, maintenance and retrieval because the documents have been
converted into electronic format. Investors can trace the status of their grievances online
which discharge them from continuous correspondences with SEBI. Finally, a grievance
will be considered as resolved /closed only after SEBI is satisfied.
The software for SCORES was designed by the National Informatics Centre
(NIC), Ministry of Information Technology, New Delhi. Various representatives of Stock
Exchanges, Depositories, Stock Brokers, Registrars and Depository Participants
cooperated in introducing SCORES and collect the feedbacks from the participants.
Information on how to lodge a grievance, as well as the appropriate format for the
Action Taken Report was provided for the division chiefs and officers of different
departments of SEBI; Stock Exchanges; Depositories; RTAs and companies‘ forming
part of NIFTY and SENSEX.176
4.7. Investor Awareness Program Arranged by SEBI
4.7.1. Investors’ Assistance and Education
Investors can enjoy investing if (1) they know how to invest; (2) they have
comprehensive knowledge of the market; (3) they deal with a safe market; and (4) due
measure are taken to redress the investors grievances. SEBI‘s investor protection scheme
is also based on above four elements which will be elaborated below:
1. SEBI tries to educate the investors and make them aware of different issues of
investments and the way they can use the earned information so that they can take
an informed decision. To attain this goal, SEBI has held many educational
program and also utilized media. In case the investors have any questions, they
176
215
can make queries through telephone, e-mails, letters, or visit SEBI office
personally.
2. SEBI has provided every detail needed for investment in public domains. It has
also launched and monitored various disclosure programs to regulate the market
and help the investors to take right decision. Under this program, stock issuers
and intermediaries reveal the due details about themselves, their products, and the
market.
3. SEBI has taken different measures such as dematerialization of securities; screen
based trading system, T+2 rolling settlement; and many others to safeguard safe
transactions in the market. Among the benefits of dematerialization of securities
was its saving many investors‘ grievances on the services of paper based
securities such as bad delivery of shares, delay in receipt of shares, non-transfer of
shares, etc. the transition from an account period settlement to T+2 rolling
settlement also significantly decreased the settlement risk.
4. SEBI supports the troubled investors through facilitating the possibility of
redressal of the grievances investors have against intermediaries and listed
companies. SEBI will also send reminders to the respective companies and
intermediaries if they do not redress investors‘ grievances. If the process of
redressed is not sufficient, SEBI adopts enforcement actions in form of
adjudication, prosecution proceedings, directions, etc.177
177
http://investor.sebi.gov.in/oiae.html
216
4.7.2. Investor Assistance and Empowerment
Since the last decade, a transition has taken place in the emphasis on investor protection
to investor empowerment as the experiences revealed that empowering the investors with
proper education at the micro and macro levels will effectively create a safe market.
Having the investors‘ empowerment as the nucleus, both the regulator and stock
exchanges have tried to engender the flow of more transparent information between
members and investors about the prices, disclosures by companies, etc.178
SEBI assists the investors through answering their queries by E-mails, personal
visit to Head Offices, as well as letters. For instance, from April 1, 2011 to March, 31,
2012, SEBI replied all the 3,672 queries, received. The investors‘ commonly asked
questions were also answered at SEBI website under FAQs. SEBI has also taken some
measures to improve the investors‘ education and awareness through media.179 Section 11
of the SEBI Act demands SEBI to launch the measures it deems appropriate for this
purpose, including measures to enhance investors‘ education as SEBI has strong belief in
the maxim: ―an educated investor is a protected investor‖.180
4.7.3. Investor Education
SEBI Chairman, U. K. Sinha, expressed his regret at the CII annual session that low
awareness and lack of confidence are distracting investors from equities. He highlighted
the dire need for taking measures to attract investors and restore investors‘ confidence.181
178
http://www.world-exchanges.org/insight/views/investor-empoverment-nse-india
179
180
http://www.sebi.gov.in/boardmeetings/122/investor.pdf
181
http://www.thehindubusinessline.com
217
SEBI believes that education of investors is among the fundamentals of a safe
investment. Investor education and awareness as well as financial education issues are
vested in Investor Awareness Division (IAD) of SEBI. To qualify the investors to
conduct transactions in securities market, SEBI Investor Protection and Education Fund
has been funding many investor awareness programs and workshops.182
Based on SEBI Act in July 23, 2007, a fund entitled as the ―Investor Protection
and Education Fund‖ (IPEF) was created initially with Rs. 10 crore from the SEBI
General Fund for educating the investors and executing other related activities.
According to the order, the following amounts would be credited to the IPEF:
1. Grants and donations granted to IPEF by the Central Government, State
Governments or other entities recognized by SEBI in line with the objectives of
the IPEF;
2. Any income or interest raised from the investments executed by the IPEF;
3. Other such amounts that SEBI may determine in support of the investors 183
The fund has been also used for the following purposes:
1. Educational programs such as seminars, training, research and publications, etc.;
2. Investors‘ awareness programs via media - print, electronic, etc.;
3. Investor education and awareness activities by those investor associations
recognized by SEBI;
4. Helping the recognized investor associations to launch legal proceedings in
support of the investors in securities that are listed or those proposed to be
listed;184
182
183
218
To this ends, SEBI has been cooperating with Investor Associations (IA), exchanges, and
different trading entities as The Association of Mutual Funds of India (AMFI). As per the
Annual Report 2011-12, till the end of March, SEBI has recognized twenty seven IAs,
which feedbacks SEBI has utilized in defining the policy of the Board. In its programs,
SEBI has also benefited from speakers from various participating bodies and provided the
educative materials for all the investors, free of cost. Table 4.57 gives an account of the
number of awareness programs/workshops conducted by SEBI in different regions during
2007-12.
Table 4.57: Trends in Awareness Programs/Workshops Conducted by SEBI during

2007-12
Region
Years
HO185 ERO186 NRO187 WRO188 SRO189
2007-08 3 0 1 0 11
2008-09 4 0 0 8 14
2009-10 13 0 3 10 14
2010-11 25 18 31 28 47
2011-12 9 35 72 19 43
Total 54 53 107 65 129
184
http://shodhganga.inflibnet.ac.in/bitstream/10603/7800/16/16_chapter%2010.pdf.
185
Head Office
186
Eastern Regional Office
187
Northern Regional Office
188
Western Regional Office
189
Southern Regional Office
219
Table 4.58: Percentage of Trends in Awareness Programs/Workshops Conducted by
SEBI during 2007-12
Region
Years
HO ERO NRO WRO SRO
2007-08 5.56 0.00 0.93 0.00 8.53

2008-09 7.41 0.00 0.00 12.31 10.85
2009-10 24.07 0.00 2.80 15.38 10.85
2010-11 46.30 33.96 28.97 43.08 36.43
2011-12 16.67 66.04 67.29 29.23 33.33
Total 100.00 100.00 100.00 100.00 100.00
Figure 4.28: Percentage of Trends in Awareness Programs/Workshops Conducted
by SEBI during 2007-12
250
200
SRO
150
WRO
NRO
100 ERO
HO
50
0
2007-08 2008-09 2009-10 2010-11 2011-12
According to the above tables, the programs and workshops have started since 2007 and
had a rising cumulative amount till 2012. The rising trend indicates SEBI‘s attention to
211
and concern for investors. SEBI‘s measures for education and awareness of investors is
itself a long term investment for SEBI.
Besides the workshops and programs mentioned above, SEBI in cooperation with
different exchange; depositories and trade organizations, has been holding regional
seminars throughout the country. The seminars aim at informing more people and
focusing more on tier 2 and tier 3 cities. An account of the number of these regional
seminars conducted in different regions in 2011-12 is given in table 4.59, below:
Table 4.59: Regional Seminars Conducted by SEBI during 2011-12
Region 2011-12
HO 20
ERO 9
NRO 8
WRO 2
SRO 6
Total 45
211
Table 4.60: Percentage of Regional Seminars Conducted by SEBI during 2011-12
Region 2011-12
HO 44.44
ERO 20.00
NRO 17.78
WRO 4.44
SRO 13.33
Total 100.00
Figure 4.29: Percentage of Regional Seminars Conducted by SEBI during 2011-12
2011-12
13.33
4.44
HO
ERO
44.44
NRO
17.78
WRO
SRO
20
212
According to table 4.60 and figure 4.29, the highest percentage of conferences i.e. 44.44,
is shown to be held in HO and the least i.e. 4.44 in WRO. The most important goal of
SEBI is encouraging the investment by individuals, resolving their concerns, and
engendering trust in them; the goal has been fulfilled through holding different training
programs by resourceful experts throughout the country.
4.7.4. Financial Education
OECD defines financial education as ―the process by which financial consumers/
investors improve their understandings of financial products, concepts and risks and,
through information, instruction and/or objective advice, develop the skills and
confidence to become more aware of financial risks and opportunities, to make informed
choices, to know where to go for help, and to take other effective actions to improve their
190
financial well-being.‖ Emphasizing on the importance of the financial education of
public, SEBI has held many programs to enhance the financial literacy throughout India.
The various programs SEBI conducted, are discussed below:
I. School Programs
SEBI in cooperation with the National Institute of Securities Market (NISM)
launched a program, namely ‗Pocket Money‘ in 2008-09 to increase the
financial literacy of school students mainly at 8 and 9 level. The program
involved the schools‘ principals, teachers, and students at different levels.
Examinations were conducted for the students and they were given the
certificates. The schools wherein the programs were held are municipal
schools of Mumbai, Navi Mumbai, and Thane as well as some schools in
190
213
Ahmedabad, Chennai, Jalgoan and Rajkot. The materials utilized in Pocket
Money Programs are also translated into English, Hindi, Tamil, Marathi, and
Gujarati. An account of the progress of the program is provided in table 4.61,
4.62 and their following figure.
Table 4.61: School Programs Conducted by SEBI during 2008-12
No. of No. of Training the

No. of Schools No. of Teachers
Year Students Trainer Programs
Covered Trained
Covered Conducted
2008-09 151 230 0 8
2009-10 10 161 3876 5
2010-11 31 110 4311 2
2011-12 360 631 50946 12
Total 552 1132 59133 27
For the ease of analysis, table 4.61 is represented in percentage is table 4.62.
Table 4.62: Percentage of School Programs Conducted by SEBI during 2008-12
No. of No. of training the

No. of Schools No. of Teachers
Year Students Trainer Programs
Covered Trained
Covered Conducted
2008-09 13.68 10.16 0.00 14.81
2009-10 0.91 7.11 3.28 9.26
2010-11 2.81 4.86 3.65 3.70
2011-12 32.61 27.87 43.08 22.22
Total 100.00 100.00 100.00 100.00
214
Figure 4.30: Percentage of School Programs Conducted by SEBI during 2008-12
100%
90%
No. of Training the

80% Trainer Programs
Conducted
70%
No. of Students
Covered
60%
No. of Teachers
50%
Trained
40%
No. of Schools
Covered
30%
20%
10%
0%
2008-09 2009-10 2010-11 2011-12
Based on the above tables and figure on School Programs Conducted by SEBI during
2011-12, all items viz. No. of Schools Covered; No. of Teachers Trained; No. of Students
Covered; and No. of Training the Trainer Programs Conducted had yearly increased. No.
of Students Covered had the most significant increase which shows that the system had
an effective performance.
215
SEBI‘s emphasis to realize its future goals has been accomplished as it has started mainly
with the schools. This approach toward schools is very adroit as the foundation of the
development of a country is set in the schools. If the planning on financial education and
investment is conducted effectively in schools, the remaining financial programs will be
fulfilled successfully, and lead to economic progress.
II. SEBI Trained Resource Persons
SEBI initiated a financial education program utilizing Resource Persons (RPs). It has
addressed school children, young investors, middle income group, executives, home
makers, retired people, and self-help groups. With the supervision of the Advisory
Committee for the Indian Prairie Educational Foundation (IPEF), the program‘s materials
are accessible in many regional languages on SEBI website, http://investor.sebi.gov.in.
RPs consist senior secondary school or college teachers with post graduate qualification
in commerce, economics or finance that are trained by SEBI. RPs should also have other
qualifications such as having mastery in English and Hindi and any other required
regional language; being enthusiastic for spreading financial education, communication
skills, skill of holding the audience attention; ability to travel across appointed area and
holding financial education programs. They should be independent in the sense that they
should be associated with no intermediary.
There are also some investor education programs that are held by IAs which is
recognized by SEBI. These RPs would also supplement the investor education programs
that are conducted through investment advisors, recognized by SEBI. ―Currently there are
297 RPs empanelled, covering 134 districts in 21 states across the country.‖191 SEBI in its
191
Ibid
216
next round of empanelment is to focus more on North Eastern areas. The frequency of the
financial programs held by RPs in different regions during 2010-1012 is provided in table
4.63.
Table 4.63: Trends in Financial Education Programs through Resource Persons
during 2010-12
Region
Years
HO ERO NRO WRO SRO
2010-11 68 0 0 106 2
2011-12 439 412 703 514 1014
Total 507 412 703 620 1016

For the ease of analysis, table 4.63 is represented in percentage in table 4.64, below:
Table 4.64: Percentage of Trends in Financial Education Programs through

Resource Persons during 2010-12
Region
Years
HO ERO NRO WRO SRO
2010-11 13.41 0.00 0.00 17.10 0.20
2011-12 86.59 100.00 100.00 82.90 99.80
Total 100.00 100.00 100.00 100.00 100.00
217
Figure 4.31: Percentage of Trends in Financial Education Programs through
Resource Persons during 2010-12
500
450
400
350
300
250
200
150
100
50
0
2010-11 2011-12
HO ERO NRO WRO SRO
The above tables and figure show that the frequency of Financial Education Programs has
been increased in all regions, mostly in SRO in 2011-12 compared to 2010-11. SEBI‘s
outstanding growth in financial education has maintained an increasing growth and
success in the fund-raising in the future.
III. SEBI Officers as Resource Persons
In line with SEBI‘s financial education programs across the country, SEBI officers have
decided to participate in conducting these programs. Reportedly, about 110 SEBI officers
voluntarily conducted RPs 35 programs throughout the country. A full target-group-wise
account of the programs conducted by RPs in different regions is provided in table 4.65.
218
Table 4.65: Financial Education Programs through RPs -Target Group Wise during
2011-12
Target Group
Region
School College Students Home Middle Retired
Executives SHG192
Students / Young Investors Maker Income Group People
HO 107 264 38 23 69 5 1
ERO 195 123 15 9 31 4 35
NRO 294 350 32 7 15 3 2
WRO 240 300 15 28 20 4 13
SRO 280 539 56 35 58 8 47

Total 1,116 1,576 156 102 193 24 98
For the ease of analysis, table 4.65 is represented in percentage in table 4.66, as follows:
Table 4.66: Percentage of Financial Education Programs through RPs - Target Group Wise
during 2011-12
Target Group
Region Middle
School College Students Home Retired
Executives Income SHG
Students / Young Investors Maker People
Group
HO 9.59 16.75 24.36 22.55 35.75 20.83 1.02
ERO 17.47 7.80 9.62 8.82 16.06 16.67 35.71

NRO 26.34 22.21 20.51 6.86 7.77 12.50 2.04
WRO 21.51 19.04 9.62 27.45 10.36 16.67 13.27
SRO 25.09 34.20 35.90 34.31 30.05 33.33 47.96
Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00
192
Self Help Group
219
Figure 4.32: Percentage of Financial Education Programs through RPs - Target
Group Wise during 2011-12
300
250
200
150
100
50
0
HO ERO NRO WRO SRO
School Students College Students / Young Investors

Executives Home Maker
Middle Income Group Retired People
SHG
Tables 4.65, 4.66, and figure 4.32 show that the highest numbers of SEBI‘s financial
literacy programs are dedicated to College students/Young Investors, and School
Students. It indicates that SEBI has started a long term investment in universities and
221
schools as the prime educational part of the country. The approach is indicative of a
clever foresight because the main parts of training and growth are constructed in schools
and at universities which are a fundamental support for the development of the countries.
Summarily, the money IPEF has spent on different schemes and programs will
finally breed educated investors who will decrease regulatory costs on SEBI as instead of
depending on SEBI for protection, they have learned to protect themselves. Moreover, it
will raise the investors‘ participation in the market and create a more prosperous
market.193
4.8. Important Perceptions
 All investment activity involves risks - the threat of suffering losses, the threat
of failing to achieve the planned investment result, etc.
 Investment risks must be assessed before making an investment decision.
Each client must carefully analyse and independently assess risks related to
investment activities, taking their possible impact and consequences into
account.
 India has passed, as seen above, a number of Anti Fraud Legislations,
Regulations and Guidance. Over the years, India has seen a remarkable
increase in regulators and stakeholders‘ expectations from Management &
Auditors towards Prevention, Detection, Investigation & Reporting of Fraud.
193
221
 Frauds, however, continue to happen. Frauds and white collar crimes have
increased considerably over the last ten years, and professionals believe this
trend is likely to continue.
 The cost to business and the public can only be estimated, as many crimes go
unreported. The statistics we currently have, show the astronomical values
associated with fraud. However the cost of fraud to businesses is difficult to
estimate because not all frauds and abuses are uncovered, not all uncovered
frauds are reported, and civil or criminal actions are not always taken on the
uncovered ones.
 Moreover, legal accounting, increased insurance costs, and loss of productivity
associated with hiring and firing employees, are additional factors that must be
considered. Companies suffer similar losses through financial frauds, and
organizations pay for them through their normal operating expenses.
 The computerisation of business operations makes organizations all the more
vulnerable to cyber fraud and abuse.
In order to combat frauds and white collar crimes in businesses, a concerted effort must
be exerted by the law-makers, the regulating and investigative bodies, management of the
business, the external auditors, and by all employees of the business.
4.9. Summary of the Chapter
Chapter 4 entitled as INVESTOR PROTECTION IN INDIA, starts with an introduction
on the importance of preserving the interest of investors for SEBI and National Stock
Exchange of India (NSE). Investigation, Enforcement, and Surveillance (IES) are
222
elaborated as the main measures taken by SEBI to safeguard the interest of investors. To
show the progress of IES, data are tabulated and analyzed mainly based on the
information provided in SEBI website. In later sections, present disclosure standards in
India with special emphasis on investors‘ protection as a significant segment of a
developed financial investment is described. After the disclosure, comes the argument on
SEBI‘s power in taking due punitive measures and redressing the investors‘ grievances.
An account of the shortages in the existing grievance redressal system is provided and the
improvements planned are also addressed.
The last section refers to the recent transition from emphasis on investors‘
protection to investors‘ empowerment, based on which SEBI has dedicated a fund to
various educational and awareness programs and measures which will eventually breed
educated investors who will decrease regulatory costs on SEBI and lead to a prosperous
market.
223
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Chapter 4: Investor Protection in India

formation. It is very important in developing investors‘ confidence and facilitating

thus essential in favoring financial stability.

4.2. Broad Categories of Investor Protection in India

Government to inspect the books of accounts of a company, to direct special audit, to

maintain a proper standard of accounting and auditing, and more.

4.2.2. Securities Contracts (Regulation) Act (SCRA), 1956

trading, including the running of stock exchanges. It aims to prevent undesirable

listing of securities on stock exchanges.

recognition and continued supervision, prevents undesirable contracts in Securities

Notification No. SRO 528, dated 16th February, 1957.139

4.2.3. Securities Contracts Regulation Rules, 1957

It is a broad-based and well-dispersed structure in shareholding and is very important for

4.2.4. National Stock Exchange of India (NSE), 1993

Derivatives Market too has been experiencing a continuous development.

through its education programs, helped in cultivation of ―a culture of knowledge to help

number of educational initiatives such as certification programs, training, financial

literacy at school level, short term courses at college level etc.‖141

Security Interest Act (SERFAESI), 2002

SARFAESI Act (2002), enacted to regulate securitization and reconstruction of financial

interest by secured creditor without the cumbersome intervention of a tribunal or a court.

Reserve Bank of India has issued guidelines on registration, measures of asset

reconstruction, prudential norms, acquisition of financial assets etc., namely 'The

Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and

Directions, 2003'. 142

4.2.6. Securities Exchange Board of India Act (SEBI), 1992

1956, and the Companies Act, 1956.

Its regulatory jurisdiction covers Corporates issuing securities and all

orderly securities market by:

(a) Promoting the development of the securities market

(b) Protecting the interests of investors in the securities market

4.2.7. Investor Education

avoid becoming victims of financial frauds. An example of such a fraud on small

capital of the erstwhile united Andhra Pradesh.143

various aspects of Investor Education and Protection.144 The Ministry of Corporate

promotion of investors‘ awareness and protection of the interests of investors.‖145

4.2.8. Regulatory Legislations and Other Investor Protection Measures

The regulatory legislations and other investor protection measures include:

 Foreign Exchange Management Act-1999 Securities and Insurance

 Indian Contract Act 1872

 Depositories Act, 1996.

 Prevention of Money Laundering Act, 2000

 Income Tax Act,1961

 Securities Transactions Tax Act, 2004

 Clause 49 of Listing Agreement

 Prevention of Corruption Act

 Indian Penal Code

4.2.9. Financial Intermediaries in Financial Market

The financial intermediaries and their role is presented as follows:

4.2.9.1. Role of Financial Intermediaries

the borrowers (government/ businessmen). The borrower (government/businessman) pays

dividend/return on the investment. Thus, financial intermediaries serve as a middleman

between saver and borrower.

4.2.9.2. The Necessity of Financial Intermediaries

Financial intermediaries are necessary because they are well-equipped to bring a

4.2.9.3. Safety of Investment

investors. Financial intermediaries also offer a reasonable return on investment, while

Financial Intermediaries have a body of experts on their staff, capable of understanding

share market fluctuations, the performance of individual companies, which companies‘

investment decisions, scrutinize credit history/record of a borrower before granting loans,

and to recover the loans given.146

4.3. SEBI and Investigation, Enforcement and Surveillance (IES)

The steps involved in investigation process are presented as follows: