World Investor Week Celebrated by Regulators: Investors and Their Core Issues Largely Excluded
India’s investor population has almost doubled since the COVID pandemic forced people to work from home in March 2020. The number of retail investors rose by 14.2mn (million) in FY20-21 alone. The significance of this becomes evident when I tell you that our investor population was just 21mn in FY2000-01 (National Council for Applied Economic Research study) and dropped to a mere 0.8mn by 2009 (Read: Investor Population: Vanishing Investors) and has suddenly soared after the pandemic.
 
This vast new investor population has sent stock indices spiralling up with their purchases and initial public offerings (IPOs) are being snapped up at dizzying valuations. In the middle of all this euphoria, the one event that ought to have celebrated this stupendous development went completely unnoticed, and largely unreported, was the celebration of ‘World Investor Week’! Yes, this happened at the end of November (22nd-28th). 
 
World Investor Week (WIW) is a ‘global event which is celebrated by securities market regulators worldwide’ at the behest of International Organisation of Securities Market Commission (IOSCO), says our regulator in a press release. In line with this, the Securities and Exchange Board of India (SEBI) set up a grand pavilion at the India International Trade Fair in Delhi, called ‘Bharat Ka Share Bazaar’ to spread awareness and educate investors. 
 
It also ensured that all stocks and commodity exchanges, led by National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), along with depositories, market intermediaries, brokerage firms, mutual funds and brokers’ associations participated in the ‘celebration,’ probably, with a few business schools, training institutions and listed companies thrown in to drum up an audience. A fun time was apparently had by all, with SEBI and the others having organised quizzes, skits, muppet shows and a “display of its investor friendly policies and facilities.” 
 
But were investors invited to this party? Apart from press releases by intermediaries, WIW appears to have been a damp squib with absolutely no buzz on social media or reportage in the mainstream media. I checked this with a Google and Twitter search, with appropriate hashtags and keywords, but found only posts and photos from intermediaries publicising the stalls set up at the trade fair. There was almost nothing from, or about, retail investors. Did SEBI, and the club of regulated market intermediaries that it exclusively engages with, forget to invite investors to the party? What would have got new investors flocking to the trade fair at this time?
 
Algos: A discussion by SEBI on retail algorithm (algo) trading, which has attracted a vast majority of the new market entrants, would have been a hit. A warning is well warranted, since badly written algos could decimate investors’ wealth if the market goes through sharp fluctuations. But wait; SEBI has reluctantly begun the process of gathering information from algo writers with a view to regulate algo trading. So that was not on the cards.
 
Crypto: The other big rush is to invest in crypto ‘assets’. According to SEBI’s release, it has been cautioning investors about ‘illegal money mobilization schemes’. While it failed to warn investors about such schemes in the regulated space (like Anugrah Stock & Broking, mentioned later), it surely could have held special sessions on cryptos and crypto-exchanges. These digital assets and unregulated exchanges on which they are traded are the biggest advertisers today; social media is awash with videos luring youngsters with high returns. WIW was an excellent opportunity to go all out to caution investors about unregulated exchanges, crypto-currencies and even digital gold. After all, SEBI recently issued a formal warning to registered debenture trustees and investment advisers against offering services on ‘unregulated’ products. Again, it doesn’t seem to have been on the agenda.
 
Failed Brokerage Firms: What about a discussion on the raft of brokerage firms that failed and were found to be running dubious Ponzi schemes to ensnare guileless and ignorant investors with the promise of high returns? There have been 28 broker defaults only in the past two years, inflicting losses that run into a few thousand crores of rupees on investors. This is the highest concentration of defaults since SEBI was set up. Again, it was not part of WIW’s celebratory events.
 
Commodity Trading and Derivatives: According to a SEBI release, it had conducted 47,000 workshops on commodity derivatives. Yet, this market remains a domain of those who understand commodities and has seen frequent regulatory action, forensic audits of exchanges, ban on certain derivatives contracts and closure of brokerage firms as well as commodity exchanges. There is very little reportage on this market in the English media; so we know very little about the state of investor awareness of grievance redress here. 
 
SCORES Redress System: Although SEBI’s own data shows that it had done very well with grievance redress, I have to constantly o enlighten aggrieved investors about the existence of SEBI Complaint Redress System. (https://scores.gov.in/scores/Welcome.html). Investors of the 28-odd brokerage firms, including Karvy, Anugrah and others, haven’t received much help there. Instead, they have been forced to file litigation in various high courts. Maybe a muppet show or a quiz would have explained why a specialised sector regulator, set up nearly 30 years ago, ought to be the last option for investors? It was apparently not on the agenda. 
 
I got around to thinking that if SEBI had spent a tiny fraction of interest on the large corpus of investors’ funds (unclaimed shares, dividends, mutual funds add up to nearly Rs20,000 crore) under its control to publicise WIW, it would have gone a long way in getting visibility and attracting investors. It was a rare opportunity to meet and engage with SEBI officials and those from exchanges. Maybe, the SEBI chairman, who inaugurated the pavilion, and senior officials could have spent some time talking to ordinary investors too? 
 
Would this have persuaded investors to make a trip to Delhi? Well, investors may not have the same determination as farmers; but I am quite certain that thousands of investors who are part of informal groups fighting for the money they have lost to failed brokers such as Karvy, Anugrah, Modex, BMA Wealth and 25 others would have turned up to meet the regulator and for guidance on how to get their money back.
 
Instead, these investors, especially those of Anugrah Stock & Broking Pvt Ltd are in court because (NSE has taken the stand that they knowingly invested in what were essentially Ponzi schemes offering high returns under the guise of derivatives advisory services. 
 
But wasn’t it NSE’s job to ensure that regulated brokerages do not run Ponzi schemes on the Exchange? Weren’t NSE’s annual inspections supposed to catch any shady activity on the part of the brokerage firm? After all, NSE is not like a crypto exchange, although it is just as profitable with an incredibly high operating margin of 73%. Let us rewind a little. In 2014, when it ought to have been investigating Anugrah’s inexplicable rise in trading turnover by a breath-taking 2,546%, NSE was congratulating the firm rather than shutting down its Ponzi operations after a proper inspection and investigation. After all, it is such operations and frothy trading that has made the Exchange so profitable. 
 
Then there is Karvy, where both exchanges (NSE and BSE) and the regulator gave this brokerage firm endless rope to sidestep rules and betray investors’ trust (Karvy Default Shows Prolonged Regulatory Failure). The buck for this stops at SEBI; so what answers would investors have got? Had the investors of Karvy, Anugrah, Modex, BMA Wealth and a score of other failed firms gone to WIW for answers, they are more likely to have organised a protest in front of the SEBI stall rather than participate in skits, quizzes and muppet shows! Is it any wonder that investors knew very little about World Investor Week? And neither did the regulator nor its regulated entities engage with those who have worked at spreading real financial literacy and help with grievance redress. 
 

Comments
virendrajain174
5 months ago
This is ridiculous, pathetic, reveals the mind-set and misplaced priorities of Indian regulators celebrating "World Investor Week" without Investors! : Virendra Jain
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