Abhi stoc b

1 First steps to investing A Beginner’s Guide Save prudently…..Invest wisely GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS (Under the aegis of Investor Education and Protection Fund) 2
Editor Prithvi Haldea PRIME Database Second Edition – June,2011 3 First steps to investing A
Beginner’s Guide TABLE OF CONTENTS Chapter Topic Page No. INVESTOR EDUCATION AND
PROTECTION FUND 6 Investor Related Websites 6 iepf.gov.in 6 watchoutinvestors.com 6
investorhelpline.in 6 Become an Informed Investor 6 1 WHY IS INVESTING IMPORTANT? 7 Savings v/s
Investing 7 Power of Compounding 7 What should be the investment objectives? 7 Investor Age and
Asset Allocation 8 Individual Category and Selection Criteria 8 FIRST TIME INVESTING 9 2 CAPITAL
MARKET 9 EQUITY SHARES 9 DEBENTURES/BONDS 9 Purchasing Securities in the Primary Market 10
Initial Public Offering (IPO) 10 Further Public Offering (FPO) 10 Dos for Investing in IPOs/FPOs 10
DON'Ts for investing in IPOs/FPOs 10 Purchasing Securities in the Secondary Market 10 DOs for
investing in the secondary market 10 DON'Ts for investing in the secondary market 11 INDICES 11
DEPOSITORY SYSTEM 11 Process for becoming a capital market investor 11 Rights as a shareholder 12
Rights as a debentureholder 12 MUTUAL FUNDS 12 Some mutual fund schemes for the first-time
investors 12 Purchasing mutual fund schemes 13 DOs for investing in mutual fund schemes 13
DON'Ts for investing in mutual fund schemes 14 3 COMPANY FIXED DEPOSITS 14 Rights of
depositholders 14 4 DOs for investing in company fixed deposits schemes 14 DON’Ts for investing in
company fixed deposits schemes 14 4 PENSION PRODUCTS 15 New Pension System (NPS) 15
Annuity/Pension Policies/Funds 15 5 INSURANCE POLICIES 15 Term Life Insurance 15 Endowment
Policies 15 Annuity / Pension Policies / Funds 15 Units Linked Insurance Policy (ULIP) 16 6
GOVERNMENT SCHEMES 16 National Savings Certificates (NSC) 16 Public Provident Fund (PPF) 16
Post Office Scheme (POS) 16 Infrastructure Bonds 16 Kisan Vikas Patra (KVP) 16 WHERE NOT TO
INVEST 7 DON’T INVEST IN DUBIOUS SCHEMES 17 MONEY CIRCULATION SCHEMES (MCS) 17 MULTI-
LEVEL MARKETING SCHEMES (MLM) 17 NETWORK MARKETING (NWM) 17 SELF EMPLOYMENT
YOJANA (SEY) 17 CHIT FUNDS 17 DEPOSITS 17 PRIVATE PLACEMENTS 17 PLANTATION COMPANIES 17
Caution for the general public 17 8 EDITOR’S 20 MANTRAS TO WISE INVESTING 18 9 INVESTOR
GRIEVANCE REDRESSAL 20 Ministry of Corporate Affairs 20 Securities and Exchange Board of India 20
Stock Exchanges 20 Reserve Bank of India 20 10 INVESTOR ASSOCIATIONS 20 Why become a
member? 20 11 ENTITIES AND CONCERNED REGULATORY BODIES 21 MCA OFFICES FOR INVESTOR
GRIEVANCES REDRESSAL 22 ACKNOWLEDGEMENTS & DISCLAIMER 24 5 INVESTOR EDUCATION AND
PROTECTION FUND Investor Education and Protection Fund (IEPF), managed by the Ministry of
Corporate Affairs, has been established under the Companies Act, 1956 for promotion of investors’
awareness and protection of the interests of investors. Activities undertaken by the IEPF include
educating and creating awareness among investors through seminars and media and funding
projects pertaining to investor education awareness and protection. Investor Related Websites IEPF
has also sponsored three websites for the purpose of investor education and protection: iepf.gov.in
This website fulfils the need for an information resource for small investors on all aspects of the
capital market and does it in the small investors’ language. This website presently covers information
on IPO Investing, Mutual Fund Investing, Stock Trading, Depository Account, Debt Market,
Derivatives, Indices, Index Funds, Investor Grievances & Arbitration (Stock Exchanges), Investor
Rights & Obligations, Do’s and Don’ts etc. This website is now available in English, Hindi and 11 major
regional languages. watchoutinvestors.com The best defense against frauds is precaution. This first-
of-its-kind-in-the-world, free public service arms the investors with a ‘precautionary’ tool to protect
themselves from fraudulent/ noncompliant companies, intermediaries and individuals. This website
is now a national webbased registry of such entities. watchoutinvestors.com enables investors to do
a fast, efficient and user-friendly search. It provides investors information on such entities/ persons
who have been indicted by various regulators/ courts. This information can be used by the investors/
prospective investors while making investments and can also be used for reviewing their portfolio
vis-à-vis such entities. As of 31st May 2011, the website had listed over 1,32,000 indicted/non-
compliant/non-existent entities covering more than 95,000 companies/ firms and over 37,000
individuals. These relate to the orders passed by several regulatory bodies, such as, BSE, CDSL, CLB,
DRT, EPFO, IRDA, MCA, NHB, NSDL, NSE, RBI, ROC, SEBI etc. investorhelpline.in This is a dedicated,
free of charge, portal to handle investor grievances relating to various authorities like Ministry of
Corporate Affairs, Registrar of Companies, Securities and Exchange Board of India and Reserve Bank
of India. Complaints are taken up by the website for redressal both with the companies and with the
concerned regulators. Investors can log-in their grievances related to the capital market and
company deposits in easy-to-fill forms and track progress of their grievance redressal online. Become
an Informed Investor Many investors, especially the small investors, do not often possess adequate
expertise/ knowledge to take informed investment decisions. Many of them are not aware of the
risk-return profiles of various investment products. A large number of investors are not fully aware of
the precautions they should take while dealing with the market intermediaries. Many are not familiar
with the market mechanisms and practices as well as with their rights and obligations. These are
substantially fuelled by the huge rewards that some investments have the potential to offer. At the
same time, wrong investment decisions can lead to huge losses too. “Investors Beware” should be
the watchword. As all investments have some risk element, this should be borne in mind by the
investors. If caution is thrown to the winds, they have only to blame themselves. Investing well has a
secret formula – having the right information, planning and making good choices. 6 Chapter 1 WHY IS
INVESTING IMPORTANT? Savings v/s Investing 1.1 Saving is the excess of your income over your
expenditure. Generally, this lies in the savings bank account or in fixed deposits with a bank. The
money is very safe, earning a small rate of interest and it can be in hand as and when required (high
liquidity). On the other hand, this money could be invested for meeting long term goals. While some
investments may rise or fall in value over time, prudent investments would earn a lot more than the
banks savings account. 1.2 It is important to take into account the effects of inflation on your
investments. (Inflation is the rise in prices of goods and services. As the prices of these increases, the
value of the rupee goes down and one will not be able to purchase as much with those rupees as
one could have in the last month or last year). Savings rarely beat the inflation rate; investments can.
1.3 In essence, the difference between savings and investment is that savings is simply idle cash
while investments help your funds to grow over a period of time. One can meet his short term needs
with his savings but to meet his long term goals, he needs to make investments. Savings primarily
help to protect the principal while investments help to earn returns beyond the inflation rate. Power
of Compounding 1.4 The most powerful tool for creating wealth safely and surely is the magical
‘power of compounding’. If you park your money in an investment with a given return, and then
reinvest those earnings as you receive them, your investment grows exponentially over time.
Illustratively, if you set aside a sum of say ` 5,000 every month from the age of 25, earning interest at
the rate of 10% p.a., in 60 years you will have with you funds worth more than Rs. 1 crore. However,
if you start at 40 with the same amount and rate of interest, the fund accumulated will amount to
only around Rs. 33 lakh. Hence, it is always advisable to start savings early to enjoy the benefits of
power of compounding. What should be the investment objectives? 1.5 There are primarily three
investment objectives: safety, returns and liquidity. In ideal scenario, this means that one would like
the investment to be absolutely safe, while it generates handsome returns and also provides high
liquidity. However, it is very difficult to maximize all three objectives simultaneously. Typically, one
objective trades off against another. For example, if one wants high returns, one may have to take
some risks; or if one wants high liquidity, one may have to compromise on returns. 1.6 Every person
should prepare a statement of financial goals covering as many requirements as possible. This is the
basis on which the financial plan shall then be prepared. A person’s financial needs depend on the
age, stage in the career path, size of the family, needs of the other family members etc. Some of the
needs can be identified with precision while others can only be determined tentatively. There may be
unanticipated needs as well for which provisions will need to be made. If the financial capability in
terms of savings is found to be inadequate to meet all the goals, these would need to be prioritized.
The financial plan is never static; it has to be reviewed from time to time to account for the changing
circumstances. 1.7 There are investment opportunities that are high on risk and there are investment
opportunities that are low on risk. Each is called an asset class. An investor needs to allocate his
savings to one or more asset classes depending upon his circumstances. 1.8 The indicative table
below charts some instruments vis-à-vis their features. Investment Option Returns Liquidity Safety
Active Involvement Amount Required Equity Shares Low to High Moderate to High Low Yes Medium
Debentures Moderate Low Moderate No Medium PSU/FI Bonds Moderate Moderate High No Low
RBI Tax Free Bonds Moderate Moderate High No Low Debt Mutual Funds Moderate High Moderate
No Low Equity Mutual Funds Low to High High Low No Low 7 Investor Age and Asset Allocation 1.9
There are no magic tricks to find the perfect asset allocation. Perfect asset allocation is not the one
which will make you rich but rather the one that will fit your profile. One of the key factors in
determining your investing profile is your age. While it is not the only factor to take into
consideration, you can manage your asset allocation according to your age. 1.10 Younger investors
should be better off with a portfolio featuring more stocks with greater growth opportunities. Older
investors nearing or already in retirement should prefer portfolios with a greater percentage of
bonds (or other fixed income products) with their more reliable revenue streams and a lower
proportion of stocks with their associated risks. 1.11 There are many ways to determine an asset
allocation, including several rules of thumb. One common suggestion is to invest your age in bonds.
So, if you are 40 years old, you may use a 40/60 (bond/equity) allocation. At worst, by such investing
according to age, the asset allocation might be slightly more conservative for the under-40 people
and slightly more risky than is advisable for those over 60. 1.12 However, if there was only age to
manage, things would be pretty easy. This is far from being that simple. In fact, age is only a
mathematical data that doesn’t take into consideration your risk tolerance. You might be young
enough to support a big market drop as you will have time to play with you to gain it back but if you
are about to have a heart attack when the market goes down by 5%, you won’t last until your
retirement! 1.13 Here is some general advice for various age groups. 18 to 35 : While you should not
be having much money to invest during this period, this is where you should risk the most.
Technically, you should not need the money you invest for retirement for a good 30 years. This is the
perfect time horizon for an investor. As such, an asset allocation with 90% to 100% in stocks would be
ideal. Unless you are good at building your own stock portfolio, it is advisable to invest through
mutual funds or index ETFs. Why should you select such an aggressive asset allocation? Simply
because it will be the type of portfolio with the highest expected yield over time. Investing in bonds
at such early age will minimize your profit expectancy for nothing. 36 to 50 : This is usually the time
of your life where you get a better job (therefore better salary). Try to aim for an asset allocation of
about 75% of equity and 25% of bonds. At your age, you still can afford a lot of risk and you should
not be shy to take them. The 25% in your asset allocation will smooth your investment returns during
major crisis but would not slow down too much. 51 to 65 : During this period, you can start seeing
your retirement. However, that should not be the reason for you to secure your asset allocation to
the maximum either. Since you would not be withdrawing much of your investment at that age, you
can still handle some market fluctuations. Going from a growth to a more balanced asset allocation
seems logical and as such, a 25%/75% asset allocation approach would allow you to earn some
decent investment returns while not suffering too much during market crashes. 66 and older : You
will for sure be retired during this period of your life. If you have been investing throughout your
whole life, you should be sitting on a solid nest egg. There are no reasons why you should now risk in
the name of higher returns. A more secure asset allocation showing a 90% to 100% bond portfolio
would be advisable. Individual Category and Selection Criteria 1.14 Are there any parameters one
should look at based upon his individual status. On a thumb rule basis, the following could be the
selection criteria before making an investment for various categories of individuals: Students Salary
EarnersPrivate Salary EarnersGovernment Professionals Traders House wives Retired Persons Returns
VI VI I VI VI I I Liquidity LI I I LI LI I I Safety I I VI I I VI VI Tax Savings LI VI I VI VI LI LI VI: Very Important
I:Important LI: Less Important 8 FIRST TIME INVESTING Chapter 2 CAPITAL MARKET 2.1 Among all
investment options available, capital market is considered the most challenging as well as most
rewarding. Capital market is a market for securities (equity and debt), where companies (and
government) raise long-term funds from the public investors, and where investors can subsequently
trade among themselves in these securities. EQUITY SHARES 2.2 Typically, personal savings of an
entrepreneur, and if required then contributions from friends/relatives are the source of funds to
start a new business. For a large project, however, as the fund requirements are large, these will not
only require term loans but go even beyond that..Thus availability of capital is a major input for
setting up or expanding business on a large scale There is a way to raise equity beyond oneself or
from a limited pool of a small circle of friends and relatives. This is by way of raising money from the
public across the country by selling shares of the company. For this purpose, the promoter has to
invite subscriptions through an offer document which gives full details about the promoters’ track
record, the company, the nature of the project, the business model, the expected profitability etc.
When an individual is comfortable with such an investment opportunity, he may apply in the
company’s public issue and upon allotment become a shareholder of the company. This way, through
aggregation, even small amounts available with a very large number of individuals translate into
usable capital for corporates. Your small savings of, say, even Rs. 5,000 can contribute in setting up,
say, a Rs. 5,000 crore telecom plant. This mechanism by which companies raise money from the
public is called the primary market. 2.3 Importantly, when you, as a shareholder, need your money
back, you can sell these shares to other or new investors. Such trades do not reduce or alter the
company’s capital. Stock exchanges bring such sellers and buyers together through stock brokers and
facilitate trading. As such, companies raising money from the public are required to compulsorily list
their shares on a stock exchange which has nationwide trading terminals.. This mechanism of buying
and selling shares through a stock exchange is known as the secondary market. 2.4 As a shareholder,
you are part owner of the company and entitled to all the benefits of ownership, including dividend
(company’s profit distributed to owners). Over the years if the company performs well, other
investors would like to become owners of such a company by buying its shares. This increase in
demand for the shares leads to increase in its price. You then have the opportunity of selling your
shares at a higher price than at which you purchased it. You can thus increase your wealth, provided
you make the right choice at the first instance of buying shares of the right companies. The reverse is
also true! It is therefore important that an investor makes an informed choice. 2.5 Equity is an
appropriate investment avenue for an investor who is prepared to take risks in order to generate
higher returns. Over the long term, returns from equity shares at aggregated levels have been
historically higher than most other avenues. (As on 31st March, 2011, the BSE Sensex had generated
a compounded annualized return of 17.6 per cent over the last 10 years). DEBENTURES/BONDS 2.6
There are primarily three types: · Non convertible debentures (NCD) – Total amount is redeemed by
the issuer at a specified time · Partially convertible debentures (PCD) – Part of the value is redeemed
and the remaining is converted to equity shares at a specified price and time · Fully convertible
debentures (FCD) – Full value is converted into equity at a specified price and time 2.7
Debentures/Bonds are contracts where one party is the lender (investor) and the other party is the
borrower (company). This contract specifies the rate of interest, the periodicity of interest payments
(monthly/quarterly/ annual), and the maturity date for repayment of the principal amount (like
3/5/7 years). The term “bond” is used for the debt instrument issued by the central and state
governments and PSUs while the term “debenture” is used for debt issues from the private corporate
sector. These instruments are normally secured/charged against the assets of the company, and are
required to be rated by credit rating agencies. 2.8 Debentures/Bonds are ideal for investors seeking
assured and regular income. These instruments typically offer interest rates higher 9 than bank fixed
deposits. Some bonds offer tax benefits to the investors. Purchasing Securities in the Primary Market
2.9 Initial Public Offering (IPO) is when a hitherto unlisted company makes either a fresh issue of
shares or some of its existing shareholders make an offer to sell of part of their existing shareholding
for the first time to the public. This paves the way for the listing and trading of such shares. An IPO of
fresh shares is typically made by a company when it needs money for growth-expansion or
diversification or acquisitions or even to meet its increasing working capital requirements. In an IPO
involving an offer for sale, the proceeds go to the selling shareholders. 2.10 Further Public Offering
(FPO) is when an already listed company makes either a fresh issue of securities to the public or the
existing promoters make an offer for sale to the public. An FPO, where fresh securities are issued, is
typically made by a company when it needs money for growth-expansion or diversification or
acquisitions or even to meet its increasing working capital requirements. An FPO is also the preferred
route (over a rights issue) when the company wants to bring in new investorsboth institutional as
well as retail. It may be pointed out that the FPO route is also being utilized extensively by the
Government for the PSUs for the purpose of disinvestment of government’s holdings. 2.11 Regarding
price of shares offered in an IPO or an FPO, SEBI does not play any role in price fixation. The issuer
company decides the price. In support of this, it is required to give full disclosures in the offer
document and also justify the issue price by parameters such as EPS, PE multiples and return on net
worth and comparison of these parameters with peer group companies. There are two types of
issues. In one, the company fixes a specified price (called fixed price issues). In the other, the
company stipulates a floor price or a price band (within 20%) and invite bids from the market to then
determine the final price (called book building issues). In the case of FPOs, the issue price is normally
at a discount to the current market price. Some companies, and specifically PSUs, offer a discount to
the retail investors in both IPOs and FPOs up to a maximum 10%. Dos for Investing in IPOs/FPOs ¸
Read the Prospectus/Abridged Prospectus carefully, with special attention to: -Risk factors -
Background of promoters -Company history -Outstanding litigations and defaults -Financial
statements -Object of the issue -Basis of Issue price -Instructions for making an application ¸ Use the
ASBA process for applying (Under this, the investor authorizes his bank to block in his bank account
an amount equivalent to the application money. The money remains in the bank. Upon finalization of
the basis of allotment, only the amount equivalent to the allotment amount is debited to the bank
account, and the rest is freed up). ¸ In case of non-receipt , within due period, the credit to demat
account/refund of application money, lodge a complaint with compliance officer of the issuer and
with post-issue lead manager DON’Ts for investing in IPOs/FPOs × Don't be influenced by any
implicit/explicit promise made by the issuer or any one else × Don't invest based only on the
prevailing bull run of the market index or of scrips of other companies in the same industry or scrips
of the issuer company/group companies × Don't expect the price of the shares of the issuer company
to necessarily go up upon listing or forever Purchasing Securities in the Secondary Market 2.12
Secondary market refers to the market where the issued shares and bonds/debentures are sold and
bought among investors through a broker of a stock exchange. DOs for investing in the secondary
market ¸ Before investing, check the credentials of the company, its management, fundamentals and
recent announcements made by them and other disclosures made. The main sources of information
are the websites of the exchanges and companies, databases of data vendors, business newspapers
and magazines ¸ Adopt trading/investment strategies commensurate with your risk-bearing capacity
as all investments carry some risk, the degree of which varies according to the investment strategy
adopted ¸ Transact only through SEBI-recognized stock exchanges and deal only through SEBI-
registered brokers/sub-brokers ¸ Give clear and unambiguous instructions to your broker/sub-
broker/DP ¸ Insist on a contract note for each transaction and verify details in the contract note,
immediately on receipt. If in doubt, crosscheck details of your trade available with the details on the
exchange's website 10 ¸ Ensure that the broker's name, trade time and number, transaction price and
brokerage are shown distinctly on the contract note ¸ Issue cheques/ drafts only in the trade name of
the broker ¸ Deliver the shares/depository slip in case of sale and pay the money in case of purchase
within the prescribed time ¸ Ensure receipt of payment/deliveries within 48 hours of payout ¸ Insist
on periodical statement of accounts ¸ Scrutinize both the transactions and the holding statements
that you receive from your DP ¸ Handle Delivery Instruction Slips (DIS) Book issued by the DP
carefully. Insist that the DIS numbers are pre-printed and your account number (Client ID) is pre-
stamped ¸ In case you are not transacting frequently, use the freezing facility in your demat account ¸
In case of disputes with the sub-broker, inform the main broker immediately DON'Ts for investing in
the secondary market × Don't forget to take account of the potential risks that are involved in
investment in shares × Don't undertake off-market transactions × Don't deal with unregistered
intermediaries × Don't fall prey to promises of unrealistic returns or guaranteed returns × Don't
invest on the basis of hearsays, rumors and tips × Don't be influenced into buying into fundamentally
unsound companies (penny stocks) based on sudden spurts in trading volumes or “low” prices or
favourable articles/stories in the media × Don't blindly follow investment advice given on TV
channels/ websites/ SMS × Don't invest under peer pressure or blindly imitate investment decisions
of others who may have profited from their investment decisions × Don't get misled by companies
showing approvals / registrations from Government agencies as the approvals could be for certain
other purposes × Don't get carried away with advertisements about the financial performance of
companies INDICES 2.13 A stock market index captures the behaviour of the overall equity market.
The ups and downs of an index reflect the changing expectations of the stock market about the
future profitability of India's corporate sector. This is achieved by giving each stock a weight
proportional to its market capitalization. The most important market index is the broad-market
index, consisting of the large, liquid stocks of the country. In India, we have NIFTY 50 and SENSEX as
the major index. DEPOSITORY SYSTEM 2.14 Earlier, there used to be physical share certificates issued,
which are now converted to Electronic form. A depository holds securities (like shares, debentures,
bonds, mutual fund units etc.) of investors in electronic form (demat form) through a registered
Depository Participant (DP). It also provides services related to transactions in securities. A DP is an
agent of the depository through which it interfaces with the investor and provides depository
services. It is now compulsory for every investor to open a beneficial owner (BO) account to apply in
IPOs/FPOs or to trade in the stock exchange. Benefits of availing depository services include: · A safe
and convenient way to hold securities · Immediate transfer of securities · No stamp duty on transfer
of securities · Elimination of risks associated with physical certificates such as bad delivery, fake
securities, delays, thefts etc. · Reduction in paperwork involved in transfer of securities · Reduction in
transaction cost · No odd lot problem, even one share can be traded · Nomination facility · Change in
address recorded with DP gets registered with all companies in which investor holds securities
electronically eliminating the need to correspond with each of them separately · Transmission of
securities is done by DP eliminating correspondence with companies · Automatic credit into demat
account of shares, arising out of bonus/split/merger etc. · Holding investments in equity and debt
instruments in a single account. Process for becoming a capital market investor 2.15 For investing in
IPOs/FPOs · The first requirement is PAN · The second requirements is a bank account · The third
requirement is demat account (shares are credited/debited in an electronic mode) which can be
opened with a registered Depository Participant. For more details, visit the websites of the two
depositories: CDSL (www.cdslindia.com) and NSDL (www.nsdl.co.in) 11 2.16 Additionally, for
investing in the secondary market · Select a broker, complete the KYC form and enter into a broker-
client agreement to open a Trading Account RIGHTS AS A SHAREHOLDER 2.17 All shareholders have
certain rights. Shareholders also need protection; not protection for assured growth of their
investments but protection from malpractices and frauds. SEBI regulates the capital market and it
has laid down guidelines for ensuring rights of the shareholders. For this purpose, it monitors all
constituents of the capital marketfrom issuers on one hand to stock exchanges on the other hand
and all other intermediaries like stock brokers, merchant bankers and underwriters. For more
information, please visit www.sebi.gov.in. Please also visit the websites of the two national-level
stock exchanges: BSEwww.bseindia.com and NSEwww.nseindia.com. Rights as a shareholder · To
receive the shares on allotment or purchase within the stipulated time · To receive copies of the
Annual Report of the company · To receive dividends, if declared, in due time · To receive approved
corporate benefits like rights, bonus, etc. · To receive offer in case of takeover, delisting or buyback ·
To participate/vote in general meetings · To inspect the statutory registers at the registered office of
the company · To inspect the minute books of the general meetings and receive copies · To complain
and seek redressal against fraudulent and investor unfriendly companies · To proceed against the
company, if in default, by way of civil or criminal proceedings · To receive the residual proceeds in
case of winding up Rights as a debentureholder · To receive interest/redemption in the stipulated
time · To receive a copy of the trust deed on request · To apply before the CLB in case of default in
redemption of debentures on the date of maturity · To apply for winding up of the company if the
company fails to pay its debt · To approach the Debenture Trustee for grievances MUTUAL FUNDS
2.18 Introduction The capital market is highly complex. The risks rise further for most individuals who
neither have the time, skills or resources to select the right securities nor to monitor their
investments subsequently nor to take decisions on exits. Selecting securities with growth and income
potential from the large number of listed securities involves careful research and monitoring of the
market, which is not possible for most small investors. Also, the key to successful investing in the
capital market is to minimize risks which can be done by building a diversified portfolio, which
however requires substantial capital. 2.19 Mutual Fund is a professional intermediary between the
investor and the capital market. Mutual Fund is an entity which collects funds from small investors,
pools these funds together and with the help of competent professionals invest these into various
equity and debt instruments, in accordance with the scheme objectives. Investors are issued units by
a mutual fund against their investments. For this, the mutual funds charge a management fee. The
profits or losses made by the mutual fund are shared with the investors in proportion to their
investments. Mutual Funds as such mitigate to a large extent the shortcomings of direct investing.
2.20 The performance of a particular scheme is denoted by Net Asset Value (NAV). The NAV per unit
is the market value of securities of a scheme divided by the total number of units of the scheme on
any particular date. Since market value of securities changes every day, the NAV of a scheme also
changes accordingly. NAV is required to be disclosed by the mutual funds on a daily basis. Some
mutual fund schemes for the first-time investors 2.21 Mutual Funds offer a wide range of schemes to
suit different needs of the investors. An investor should select suitable schemes matching his
investment objective. One must study the offer document of the scheme carefully; due care must be
given to sections relating to main features of the scheme, risk factors, initial expenses and recurring
expenses of the scheme, exit loads, sponsor’s track record of the sponsor and of fund managers, past
and pending litigations/defaults. The past track record of performance of the scheme or other
schemes of the same mutual fund is an important input in the decision making. Though past
performance of a scheme is not an indicator of its future performance and good 12 performance in
the past may or may not be sustained in the future, this still is one of the important factors for
making the investment decision. 2.22 Many investors are tempted to invest in schemes that are
available at a low NAV. Accordingly, they are even drawn towards NFOs, which are made available at
Rs. 10 per unit. Investors should understand that in case of mutual funds schemes, lower or higher
NAVs of similar type schemes of different mutual funds have no relevance. At the entry point for the
investor in an existing scheme, the NAV reflects the present value of the underlying assets, and a
higher NAV in fact shows a comparative high quality of assets. In NFOs, the initial corpus shall be first
invested and the NAV shall then depend upon the quality of investments. 2.23 Growth/Equity
Oriented Schemes normally invest a major part of their corpus in equities, and as such carry higher
risks/rewards. Growth schemes are good for investors having a long-term outlook. Such schemes
could be focused, for example, investing only in large cap stocks or only in mid cap stocks etc. 2.24
Income/Debt Oriented Schemes aim to provide regular and steady income to the investors. As such,
these schemes generally invest in fixed income securities such as bonds, corporate debentures,
Government securities and money market instruments. Such schemes are less risky, but offer low
returns. 2.25 Balanced Schemes offer the middle path by combining both growth and income. As
such, these schemes invest both in equities and in fixed income securities. These are appropriate for
investors who do not wish to take excessive risk and at the same time are also looking for some
capital appreciation. Such schemes generally invest 40-60% in equity and the balance in debt
instruments. 2.26 Sector Specific Funds/Schemes invest in the securities of a pre-specified
sector/industry (like Pharmaceuticals, Software, FMCG, PSUs, Banks). The returns in these funds are
significantly dependent on the performance of the respective sector/industry. Such funds may give
higher returns, but they are also more risky. 2.27 Tax Saving Schemes offer tax rebates to the
investors under specific provisions of the Income Tax Act. A good example of this is the Equity Linked
Savings Schemes (ELSS). Pension schemes launched by mutual funds also offer tax benefits. Such
schemes are growth oriented and invest pre-dominantly in equities. 2.28 Capital Protection Oriented
Schemes are oriented towards protection of capital but not with guaranteed returns. Such schemes
typically invest a part of their portfolio into AAA rated bonds in such a way that on maturity, this
investment equals to 100 percent of the original capital. The balance of portfolio is invested in other
assets which offer higher returns. 2.29 Systematic Investment Plans (SIP) is a convenient option
which offers disciplined investing. Under SIP, an investor invests a fixed amount regularly, say every
month or quarter. Such investments are made at the respective prevailing NAVs. The investor can
redeem his units any time irrespective of whether he has completed his minimum investment in that
scheme. 2.30 Index Funds replicate the portfolio of a particular index such as the BSE Sensex or the
S&P NSE Nifty. These schemes invest in the securities in the same weightage as in the index. NAVs of
such schemes rise or fall substantially in accordance with the rise or fall of the index. 2.31 Exchange
Traded Funds, popularly known as ETFs, select a market index and make investments in the basket of
stocks drawn from the constituents of that index. The fund may invest in any or all of the stocks
constituting that index but not necessarily in the same proportion. 2.32 Gold ETFs are funds where
the underlying asset is standard gold bullion of 0.995 purity and the investors’ holding is denoted in
units, unlike the equity mutual fund, where the underlying asset is the stocks of various companies.
2.33 All Mutual Funds are regulated by SEBI. For more information, visit www.sebi.gov.in and
www.amfiindia.com. Purchasing mutual fund schemes 2.34 A new scheme launched by a mutual
fund to collect funds from the investors is called a New Fund Offering (NFO). Launches of NFOs are
usually advertised in newspapers/TV. Investors can also contact agents and distributors of mutual
funds for necessary information and application forms. The units of existing schemes can be
purchased directly from the fund itself or from distributors/brokers/sub-brokers/agents. DOs for
investing in mutual fund schemes ¸ Read the offer document carefully before investing ¸ Investments
in mutual funds may be risky, and do not necessarily result in gains ¸ Invest in a scheme depending
upon your investment objective and risk appetite 13 ¸ Note that past performance of a scheme or a
fund is not indicative of the scheme's or the fund's future performance. Past performance may or
may not be sustained in the future ¸ Keep regular track of the NAV of the schemes in which you have
invested ¸ Ensure that you receive an account statement for your investments/ redemptions DON'Ts
for investing in mutual fund schemes × Don't invest in a scheme just because somebody is offering
you a commission or some other incentive, gift etc. × Don't get carried away by the name of the
scheme/ mutual fund × Don't be guided solely by the past performance of a scheme/ fund × Don't
forget to take note of the risks involved in the investment × Don't hesitate to approach the proper
authorities for redressal of your doubts/ grievances. × Don't deal with any agent/broker dealer who
is not registered with AMFI Chapter 3 COMPANY FIXED DEPOSITS 3.1 Many companies accept Fixed
Deposits from investors, typically for short durations of 6 months to 3 years. These are similar to
bank fixed deposits but entail lesser liquidity and usually carry higher risk and return. The attractive
returns on such deposits draw many investors to channel their savings into such deposits. This results
in mobilization of household savings for utilization in productive purposes by the corporate sector.
3.2 Some key features of Company Fixed Deposits are: · Fixed deposit scheme offered by a company.
Similar to a bank deposit · Used by companies to borrow from small investors · The investment
period must be selected carefully as most FDs are not encashable prior to their maturity · Not as safe
as a bank deposit. Company deposits are ‘unsecured’ · Offer higher returns than bank FDs, since they
entail higher risks · Ratings can be a guide to their safety Rights of depositholders ß Right to receive
periodic interest payments on time. ß Right to receive intimation regarding any amendment to the
terms of repayment of deposits. ß Right to receive the amount of matured deposits on time. ß Right
to intimation regarding unclaimed deposits before transfer to the IEPF. ß Right to file complaint in the
prescribed format before Company Law Board (in the office where the registered office of the
company is situated) in case of default in repayment of deposits. ß Right to alternatively file
complaint in the Consumer Forum under the Consumer Protection Act, 1986. DOs for investing in
company fixed deposits schemes ¸ Do check the credit rating assigned by the Credit Rating Agencies
to the Fixed Deposits being considered ¸ Do ignore the unrated Fixed Deposit schemes ¸ Do
understand the background and credibility of the promoters ¸ Do choose a company with a better
track record for similar rated companies ¸ Do avoid investing in Fixed Deposits of companies whose
promoters have a dubious record ¸ Do realize while investing in Fixed Deposits that if the company is
unable to repay your money, you may end up losing it, as Deposits are unsecured ¸ Do refer to the
investor service standards of the company ¸ Do lodge a complaint with the concerned regulator in
case the company defaults in repayment of deposits (For listed companies, file complaint with SEBI;
for manufacturing companies, file complaint with MCA; for banks and NBFCs, file complaint with RBI)
¸ Do state the name of the guardian in the application, if the deposit is in the name of a minor ¸ Do
always have a nominee for the deposits made by you DON’Ts for investing in company fixed deposits
schemes × Don’t invest all or substantial part of your savings in Fixed Deposits 14 × Don’t get lured by
high interest rates × Don’t forget to check on track record of the company × Don’t invest in
companies that care little about investor services × Don’t hesitate to seek regulator’s assistance for
any grievance Chapter 4 PENSION PRODUCTS 4.1 New Pension System (NPS): A person can build his
retirement corpus during his working life by regularly contributing (the minimum amount being Rs.
6,000 p.a.) to the NPS till the age of 60. Such contributions are invested by the Pension Fund
Manager (PFM) the investor chooses, in the investment option of his choice: Active Choice Ö Asset
Class E (Equity): Invests in index funds (the maximum allowed is 50%, the balance has to be in Asset
Class G & C) Ö Asset Class G (Government securities): Invests in central and state government bonds
Ö Asset Class C (non government debt): Invests in liquid funds of Asset Management Companies,
bank fixed deposits, rated bonds issued by corporates, banks, financial institutions, PSUs,
Municipality and Infrastructure entities. Auto Choice (Life cycle fund) Under this option, the
contributions are automatically allocated to the three asset classes in a predefined manner
depending on the investor’s age. 4.2 Upon subscribing, the investor is allotted a Permanent Pension
Account Number (PPAN). The PPAN will remain constant even if the investor changes the PFM, his
location or employer. The returns earned on the contributions would depend on the investment
option. Charges are applicable to the NPS account as prescribed by the regulator-Pension Fund
Regulatory and Development Authority (PFRDA). For further details, visit www.pfrda.org.in 4.3 At the
age of 60, a minimum of 40% of the accumulated amount in the account has to be used to buy a
pension (annuity) scheme from any insurance company from whom the investor will receive monthly
pension. The balance of 60% in the account can be withdrawn or be used to buy annuity. 4.4
Annuity/Pension Policies/Funds are products of the insurance companies and offer guaranteed
income either for life or for a certain period without any insurance cover. Chapter 5 INSURANCE
POLICIES 5.1 Insurance, as the name suggests is an insurance against future loss. Life insurance is the
most common insurance cover for an individual. Life Insurance is a contract providing for payment of
a sum of money to the person assured, or following him to the person entitled to receive the same,
on the happening of a certain event. It is a good method to protect your family financially, in case of
death, by providing funds for the loss of income. Term Life Insurance · Lump sum is paid to the
designated beneficiary in case of the death of the insured · Policies are usually for 5, 10, 15, 20 or 30
years · Low premium compared to other policies · Does not carry any cash value Endowment Policies
· Provide for periodic payment of premiums and a lump sum amount either in the event of death of
the insured or on the date of expiry of the policy, whichever occurs earlier Annuity / Pension
Policies / Funds · No life insurance cover but a guaranteed income either for life or a certain period ·
Taken so as to get income after the retirement · Premium can be paid as a single lump sum or
through installments paid over a certain number of years · The insured receives back a specific sum
periodically from a specified date onwards (can be monthly, half yearly or annual) · In case of the
death, it also offers residual benefit to the nominee. 15 Units Linked Insurance Policy (ULIP) · ULIP is
a life insurance policy, providing a combination of risk cover and investment. · The dynamics of the
capital market have a direct bearing on performance of ULIPs. · Most insurers offer a wide range of
funds to suit one’s investment objectives, risk profile and time horizons. Different funds have
different risk profiles. The potential for returns also varies from fund to fund · ULIPs offered by
different insurers have varying charge structures. Broadly the different fees and charges include-
Premium allocation charges, Mortality charges, fund management fees, policy/administration
charges and fund switching charges DOs for an insurance policy ¸ Do review your insurance coverage
¸ Do consider how much life cover you need and your affordability to pay premium ¸ Do study details
of various schemes ¸ Select a policy that suits you in terms of your requirement and premium
outflows ¸ Do get an advice from an insurance professional who offers policies of different insurance
companies ¸ Do go online to get the best quotes and verify the same before choosing one ¸ Do
consider two single plans rather than joint cover ¸ Do disclose correct information in your application
¸ Do check and update your policy regularly DON’Ts for an insurance policy × Don’t purchase a policy
unless you understand the concept behind it × Don’t buy life insurance unless you need it × Don’t opt
for the cheapest deal without understanding the risk × Don’t forget to check for terminal illness
benefits × Don’t limit your choice to one insurer × Don’t over-burden yourself with unaffordable
premium outflows × Don’t blindly trust the information that is available online × Don’t lie in your
medical exam × Don't cancel any current insurance policy until you receive a certificate × Don't do
anything to hinder an investigation if you file a claim × Don't default on your payments which may
lead to cancellation at the time of need × Don't forget to report accidents and mishaps to your
insurance company, even if you don't plan on filing a claim Chapter 6 GOVERNMENT SCHEMES 6.1
The Government offers a wide variety of savings/investment products: National Savings Certificates
(NSC) · Popular Income Tax Savings scheme, available throughout the year · Interest rate of 8% ·
Minimum investment Rs. 100, no upper limit · Maturity period of 6 years · Transferable and a
provision of loan Public Provident Fund (PPF) · Interest rate of 8% p.a · Minimum investment limit is
Rs. 500 and maximum is Rs. 70,000 · Maturity period of 15 years · The first loan can be taken in the
third financial year from the date of opening of the account, or up to 25% of the amount at credit at
the end of the first financial year. Loan amount can be returned in maximum of 36 installments · A
person can withdraw an amount (not more than 50% of the balance) every year from the 7th year
onwards Post Office Scheme (POS) · One of the best Tax Saving Schemes · It is available throughout
the year · Post Office schemes depends upon the type of investment and maturity period, which can
be divided into following categories: Monthly Deposit/Saving Deposit/Time Deposit/ Recurring
Deposit Infrastructure Bonds · Lock in period of three years · Tax benefit U/S 88 on investments up to
Rs. 20,000 · Any redemption prior to maturity nullifies the tax exemption Kisan Vikas Patra (KVP) ·
Money invested in this scheme doubles in 8 years and 7 months · There is a minimum investment
limitation of Rs. 100 with no upper limit · This scheme is available throughout the year · Currently,
there is no tax benefit on investment under this scheme 16 WHERE NOT TO INVEST Chapter 7 DON’T
INVEST IN DUBIOUS SCHEMES Introduction 7.1 There are several dubious schemes operating in the
market. The promoters of such schemes float companies with attractive names. They start in a
particular area and then, on attaining saturation of member enrollments, keep shifting over to new
areas. While promoting the schemes, they get film stars, politicians, sportspersons etc. at grand
functions to impress the public. They engage persuasive direct marketing agents, print attractive
brochures, release eye-catching advertisements and hoardings and offer gifts to the investors. They
also use attractive slogans. They also “honour” their members with titles like Silver Member or Gold
Member. Some of such schemes that are designed to entrap the gullible public by luring them with
the promise of becoming rich overnight are: MONEY CIRCULATION SCHEMES (MCS) MULTI-LEVEL
MARKETING SCHEMES (MLM) NETWORK MARKETING (NWM) SELF EMPLOYMENT YOJANA (SEY) 7.2
By enrollment into such scheme, one gets back some or full initial investment and then keeps gaining
financially by enrolling new members. So also the second set of enrollers keeps multiplying and gain
financially, luring every onlooker. Such a system of chain to work endlessly to provide profit to
everyone concerned ultimately breaks down at some stage, resulting in big financial losses to many.
When a person fails to get his required clients or enrollers, the promoters of the scheme do not tell
about the non-viability of the scheme but blame it as one’s personal failure. Many companies have
now disguised into the activity of marketing goods, services, drugs and health care products. CHIT
FUNDS 7.3 Chit fund is a kind of savings scheme under which a person enters into an agreement with
a specified number of persons that every one of them shall subscribe a certain sum of money by way
of periodical installments over a definite period and that each such subscriber shall, in his turn, as
determined by lot or by auction or by tender, be entitled to the prize amount. However, there are
many such schemes which have been misused by their promoters and there are many instances of
the founders running what is basically a Ponzi scheme and absconding with their money. DEPOSITS
7.4 Finance Companies take deposits from the public, promising them unusually high returns. Since
high returns are unsustainable, ongoing repayments of interest and deposit amounts depend on
continuous and uninterrupted flow of fresh deposits. At some stage, when the flow of deposits gets
stifled, the payments to the investors stop, leaving them high-and-dry. PRIVATE PLACEMENTS 7.5
Many companies offer equity shares/convertible debentures/preference shares etc to the public
through the private placement route, often for a “a mega project’ and promise dream returns. By
law, such securities cannot be sold to more tan 49 persons, beyond which the Company is required to
come out with a Public Issue under the guidelines of SEBI. PLANTATION COMPANIES 7.6 Many
companies offer schemes that multiply money by investment into plantations. Most of such
companies are not registered with SEBI, and typically have fled with the investors’ monies. Caution
for the general public 7.7 Remember that there is no free lunch and that there is some catch when
some one offers to make money for you easily and quickly. So any get rich quick scheme or high
returns schemes should be suspected. Remember also that these schemes are unsecured, are illegal
and are not regulated by the Government. As such, if you lose money, you will not be able to seek
any help from the Government. 17 Chapter 8 EDITOR’S 20 MANTRAS TO WISE INVESTING Save
prudently…..Invest even more wisely · You need to invest, otherwise your savings will depreciate in
value/purchasing power. · However, mindless or reckless investing is hazardous to wealth; Please
become an investor… and not a trader or a gambler. 20 Mantras to Wise Investing Mantra 1 Follow
life-cycle investing · You can afford to take greater risks when you are young. · As you cross 50, you
should consider gradually getting out of risk instruments. · By 60, you may exit risk instruments. (To
not lose your capital when you have stopped earning new money). There are better things to do than
watch the ticker on TV! Mantra 2 Read carefully, and take informed decisions · Do due diligence; take
informed decisions. · Read about options and processes on iepf.gov.in and visit mca.gov.in for more
information on companies · For example, for IPOs, read about the offer. This is difficult, with the offer
documents now running into more than 1000 pages; abridged prospectus too is difficult to read. Yet,
read you must, at least, the risk factors, litigations, promoters, company track record, issue objects
and key financial data. Mantra 3 Invest only in fundamentally strong companies · Invest only in
companies with strong fundamentals; these are the ones that will withstand market pressures, and
perform well in the long term. · Strong stocks are also liquid stocks. · Do not go for penny stocks; you
may get lured as these rise by 5-10% a day against top stocks that rise 5-10% in a year; you will
typically enter at peak and then make losses. · Remember, equity investments cannot be sold back to
the company/promoters. Mantra 4 Consider investing in IPOs · IPOs have been a good entry point. ·
Decide whether you are investing in an IPO as an IPO or in the IPO of a company. · During bull runs,
almost all IPOs provide positive returns on the listing day. If investing in an IPO just because it is an
IPO during a bull phase, it may be advisable to exit on the listing date, as you have invested without
due diligence. · However, most such investors put IPOs on a pedestal and expect them to perform
forever. That will not happen as an IPO becomes a listed stock on the listing date, and will then
behave like that; and only some will be outstanding. · If an investor does not book profit on the
listing date, he is either greedy or takes a wrong call on the company/industry/market. He should
then not fault the IPO price or blame regular/issuer/merchant banker. In any case, he invested in the
IPO by choice; it was not forced upon him. · However, if you invest in the IPO of a company, with due
diligence, then do not get bothered by immediate post-listing performance or volatility. Remain
invested as you would in a listed stock. Mantra 5 PSU IPOs deserve special attention · PSU IPOs are
typically from companies that are profitable and have a significant track record and market
leadership; also very little risk of fraud. · In almost all PSU IPOs, there is a discount for the retail
investors. Mantra 6 Invest in mutual funds, but select the right fund and scheme · Mutual funds are a
better vehicle for the small investors, most of whom have little skills or time to manage a personal
portfolio. · The problem is that there are too many mutual funds, and there are too many schemes.
Spend time to select the right fund manager and the right scheme/s. · And remember, mutual funds
are subject not just to market risks, and that investing in these does not mean guaranteed returns.
Mantra 7 Beware of free advice · Too many people in the capital market offer free advice; these
come through TV, print media, websites, emails and SMS. · Don’t act blindly on such advice;
remember free advice carries no accountability. 18 Mantra 8 Don’t get taken in by advertisements ·
Advertisements are to make you feel good. · Don't get carried away by attractive headlines,
appealing visuals/messages. · Don’t get carried away by upward arrows, big percentages and
deceptive numbers. Mantra 9 Don't get overwhelmed by sectoral frenzies/bull runs · Remember, you
can not buy the shares of the Indian economy or of India Inc. or of a sector… ultimately you have to
buy into a specific company. · Also, sectoral frenzies keep changing. · All companies in a sector are
not necessarily outstanding. Each sector will have some very good companies, some reasonably good
companies and many bad companies. · Be also careful about companies that change their names to
reflect current sectoral fancy. Mantra 10 Look at the credentials of the entity/person · Many
scamsters are waiting to exploit your greed; targeting gullible small investors. · Be careful about the
entity seeking your money; visit watchoutinvestorts.com before investing. Mantra 11 Be careful
promoters issuing shares/ warrants to themselves · Many a times, preferential allotments to
promoters are for the benefit of the promoters only, at the expense of minority shareholders.
Mantra 12 ”Cheap” shares are not necessarily worth buying · Price of a share can be low (and
therefore appear cheap) because in reality the company is not doing well; the hype about the
company/sector and comparison with prices of good companies may induce you. · Worse, the price
can become low because the face value has been split (over 500 companies have split their shares);
rationale given is to make shares affordable to small investors; not valid as one can buy even one
share; real purpose is to make shares appear “cheap” Mantra 13 Beware of guaranteed returns offers
· Be extra careful before investing in any offer which promises very high returns. · Remember the
plantation companies many of which promised phenomenal returns (in some cases, 50% on Day 1)! ·
Let not greed make you an easy prey! Mantra 14 Don’t borrow to invest · Interest mounts by the day;
returns don’t necessarily. · Invest within your means. Mantra 15 Deal only with registered
intermediaries · There are many unregistered operators in the market who will lure you with
promises of high returns, and then vanish with your money or they will mis-sell or they will
undertake unauthorized transactions. · Deal with registered intermediaries, it also allows recourse to
regulatory action. Mantra 16 Don't over-depend upon 'comfort' factors like · IPO Grading ·
Independent Directors · Corporate Governance Awards · CSR Activities Mantra 17 Don’t take
decisions based just on summary accounts · Read through the schedules as well as qualifications and
notes to the accounts. · Check out for “Other Income” and unusual expenses · Look out especially for
entries relating to related party transactions, sundry debtors, subsidiaries’ accounts, cash/bank
balances. Mantra 18 Learn to sell · Most investors buy and then just hold on (Regrettably, most
advice by experts on the media is also to buy or hold, rarely to sell). · Profit is profit only when it is in
your bank (and not in your register or Excel sheet). · Don’t be greedy. Leave some profits for the
buyer too. Remember, you cannot maximize the market’s profits. · Set a profit target and sell, unless
you have good reasons to hold on for very long term. Mantra 19 If after all this, you do have a
grievance... · Seek help of www.investorhelpline.in. The final… Mantra 20 Be honest · Be honest as
only then you can demand honesty and fight for your rights. 19 Chapter 9 INVESTOR GRIEVANCE
REDRESSAL 9.1 The capital market can grow only when investors find it safe for them to invest and
they are assured that the rules governing the market are fair and just for all the players. For this
purpose, there is an effective mechanism for resolutions of disputes and grievances in place. Ministry
of Corporate Affairs 9.2 Ministry of Corporate Affairs (MCA) provides an efficient and effective
grievance redressal framework to address and resolve the grievances speedily. Investors can
approach any of the officers of the Registrar of Companies, the Regional Directors as well as the
Headquarters of MCA with their grievances. The complaints are taken up with the respective
companies. For complaints relating to areas not in the charter of MCA, these are forwarded to the
relevant regulator and the investors are also advised to approach the concerned regulator. 9.3
Investor Grievance Handling & Redressal has acquired a special focus with the implementation of
MCA21 e-Governance portal, which has a dedicated online facility for filing of grievances on
www.mca.gov.in. It also has ‘online status tracking’ facility to enable monitor the progress. 9.4 MCA
also operates an outsourced service through www.investorhelpline.in. This is a dedicated portal to
handle investor grievances. The service provider takes up the redressal of the complaints both with
the concerned regulators as well as with the companies. Securities and Exchange Board of India 9.5
In the event of capital market related grievances not resolved by the concerned company or the
intermediary, investors can approach SEBI at www.sebi.gov.in. The following kinds of complaints can
be filed: Type-I: Refund Order/ Allotment Advise. Type-II: Non-receipt of dividend. Type-III: Non-
receipt of share certificates after transfer. Type-IV: Debentures. Type-V: Non-receipt of letter of offer
for rights. Type VI: Collective Investment Schemes Type VII: Mutual Funds/ Venture Capital Funds/
Foreign Venture Capital Investors/ Foreign Institutional Investors/ Portfolio Managers, Custodians.
Type VIII: Brokers/ Securities Lending Intermediaries/ Merchant Bankers/ Registrars and Transfer
Agents/ Debenture Trustees/ Bankers to Issue/ Underwriters/ Credit Rating Agencies/ DP. Type IX:
Securities Exchanges/ Clearing and Settlement Organizations/ Depositories. Type X: Derivative
Trading Type XI: Corporate Governance/ Corporate Restructuring/ Substantial Acquisition and
Takeovers/ Buyback / Delisting / Compliance with Listing Conditions Stock Exchanges 9.6 The
following types of complaints should be filed with the concerned stock exchange: · Complaints
related to securities traded/listed with the exchanges. · Complaints regarding trades effected in the
exchange with respect to the companies listed on it. · Complaints against the brokers/sub-brokers of
the exchange. Reserve Bank of India 9.7 The RBI website-www.rbi.org.in- has a dedicated facility for
investor grievances handling and resolution. All complaints relating to banks and company fixed
deposits should be filed with RBI. Chapter 10 INVESTOR ASSOCIATIONS 10.1 Why become a
member? It is often difficult for an investor to fight for his rights at an individual level. This can also
include settling of investor grievances. It is ideal for an investor to become a member of an investor
association, who can take up causes on his behalf. Moreover, many of the investor associations
regularly organize education seminars for their members, in addition to organizing special talks by
eminent experts. The list of investor associations/NGOs/voluntary agencies registered with IEPF and
SEBI is available on www.iepf.gov.in and www.sebi.gov.in. 20 Chapter 11 ENTITIES AND CONCERNED
REGULATORY BODIES 11.1 Given below is a list of types of companies/ intermediaries/service
providers/activities in the financial market. The names of the relevant bodies that regulate them and
their website addresses are given in the second and the third columns. Type of Entity/Activity
Regulatory body Website Auditors ICAI/CAG www.icai.org www.cag.gov.in Banks RBI www.rbi.gov.in
Banks –Issue Collection SEBI www.sebi.gov.in Chit Funds REG. OF CHIT FUNDS - Collective Investment
Schemes SEBI www.sebi.gov.in Companies –All MCA/ROC www.mca.gov.in Companies –Listed
MCA/ROC/SEBI/SE www.mca.gov.in www.sebi.gov.in Company Secretaries ICSI www.icsi.edu
Competition CCI www.cci.gov.in Co-operative Banks RBI www.rbi.gov.in Cost Accountants ICWAI
www.icwai.org Credit Rating Agencies SEBI www.sebi.gov.in Custodial Services SEBI www.sebi.gov.in
Debenture Trustees SEBI www.sebi.gov.in Depositories SEBI www.sebi.gov.in Depository Participants
SEBI/NSDL/CDSL www.sebi.gov.in www.nsdl.co.in www.cdslindia.com Foreign Investment Institutions
SEBI www.sebi.gov.in Housing Finance Companies NHB www.nhb.org.in Insurance Brokers/ Agents
IRDA www.irdaindia.org Insurance Companies IRDA www.irdaindia.org Investment Bankers SEBI
www.sebi.gov.in Investor Associations SEBI www.sebi.gov.in Media(Print/Electronic MIB
www.mib.nic.in Mutual Funds SEBI www.sebi.gov.in Mutual Fund Brokers/ Agents SEBI/AMFI
www.sebi.gov.in www.amfiindia.com New Pension Scheme (NPS) PFRDA www.pfrda.org.in Non-
Banking Financial Companies RBI www.rbi.gov.in Nidhi Companies MCA www.mca.gov.in Plantation
Companies SEBI www.sebi.gov.in Portfolio Managers SEBI www.sebi.gov.in Registrars/Share Transfer
Agents SEBI www.sebi.gov.in Serious Frauds SFIO www.sfio.nic.in Stock Brokers SEBI/SE
www.sebi.gov.in Stock Exchanges SEBI www.sebi.gov.in Sub-Brokers SEBI www.sebi.gov.in Venture
Capital Funds SEBI www.sebi.gov.in 21 MCA OFFICES FOR INVESTOR GRIEVANCES REDRESSAL MAIN
OFFICE Mr.A.K.Srivastava,Jt. Secretary Ministry of Corporate Affairs 5th Floor, A-Wing, Shastri
Bhawan New Delhi-110001 Phone: 23383180 Fax: 23386068 [email protected]
NORTHERN REGION Office of Regional Director A-14,Sector-I , PDIL Bhavan NOIDA Office of Registrar
of Companies Hall Nos. 405-408,Bahu Plaza South Block Rail Head Complex Jammu-180012 Office of
Registrar of Companies (Punjab, Chandigarh & Himachal Pradesh) Corporate Bhawan Plot No. 4-B,
Sector -27-B Madhya Marg Chandigarh-160019 Office of Registrar of Companies (Delhi & Haryana)
4th Floor, IFCI Tower Nehru Place New Delhi-110019 Office of Registrar of Companies, (Uttar Pradesh
& Uttrakhand) 10/499-B Allenganj, Khalasi Lines Kanpur-208002 WESTERN REGION Office of Regional
Director Everest Building,5th floor 100 Marine Drive Mumbai-400002 Office of Registrar of
Companies (Maharashtra) Everest Building, 1tst Floor 100 Marine Drive Mumbai-400002 Office of
Registrar of Companies, Pune PMT Building , 3rd Floor Deccan Gymkhana Pune-411004 Office of
Registrar of Companies (Goa , Daman & Diu) Company Law Bhavan EDC Complex, Plot No.21 ,Patto,
Panaji Goa-403001 EAST & NORTH EASTERN REGION Office of Regional Director (East & North
Eastern Region) Nizam Palace 2nd MSO Building,3rd Floor 234/4, A.J.C.B,.Road Kolkata-700020 Office
of Registrar of Companies (West Bengal) Nizam Palace 2 nd MSO Building,2nd Floor
234/4,A.J.C.B.Road Kolkata-700020 Office of Registrar of Companies (Orissa) 2nd Floor, Chalchitra
Bhawan Buxi Bazar Cuttack–753001 Office of Registrar of Companies ( Bihar & Jharkhand) Maurya
Lok Complex,Block A, West Wing 4 th Floor,Dak Bunglow Road Patna–800001 Office of Registrar of
Companies (NE Region) Morello Building,Ground Floor Kachery Road Shillong–793001 NORTH-
WESTERN REGION Office of Regional Director (North -Western Region) Registrar of Companies
Bhavan Opp Rupal Park Society Naranpura Ahmedabad-380013 Office of Registrar of Companies
(Gujarat) ROC Bhavan Opp Rupal Park Society,Naranpura Ahmedabad-380013 Office of Registrar of
Companies (Rajasthan) Corporate Bhawan, 2nd Floor G/6-7, Residency Area, Civil Lines Jaipur-
302001 Office of Registrar of Companies (Madhya Pradesh & Chattisgarh) 3rd Floor, 'A' Block, Sanjay
Complex Jayendra Ganj ,Gwalior-474009 SOUTHERN REGION Office of Regional Director 5 th Floor
Shastri Bhavan 26, Haddows Road Chennai-600006 Office of Registrar of Companies (Andhra
Pradesh) 3-5-398,Kendriya Sadan, 2 nd Floor Sultan Bazar, Koti Hyderabad-500095 Office of Registrar
of Companies (Kerala) 1 st Floor, Corporate Law Bhawan BMC Road,Trikkakara Kochi-682021 Office of
Registrar of Companies (Karnataka) 2 nd Floor, E Wing, Kendriya Sadan Koramangala, Bangalore-
560034 Office of Registrar of Companies Tamil Nadu ( Coimbatore) Stock Exchange Building,2nd Floor
683, Trichy Road,Singanallur Coimbatore-641005 Office of Registrar of Companies Tamil Nadu
( Chennai) Block 6,B Wing, 2nd Floor, Shastri Bhavan 26, Haddows Road Chennai-600006
ACKNOWLEDGEMENTS & DISCLAIMER Acknowledgements This Guide has been prepared/ compiled/
adapted primarily from the information available on the websites of the Ministry of Corporate Affairs
(www.mca.gov.in), Investor Education and Protection Fund (www.iepf.gov.in), SEBI (www.sebi.gov.in),
NSE (www.nseindia.com), BSE (www.bseindia.com) and MCX-SX (www.mcx-sx.com), from the
reading material provided by ICAI, ICSI and ICWAI, and inputs from the Editor. Disclaimer Information
provided herein is purely for dissemination of information and creating awareness among the
investors about various aspects of investing. Although due care and diligence has been taken, MCA or
Editor or organizations distributing this reading material shall not be responsible for any loss or
damage resulting from any action taken by a person on the basis of the contents of this Guide. It may
also be noted that laws/regulations governing the markets are continuously updated/ changed, and
hence an investor should familiarize himself with the latest laws/ regulations by visiting the relevant
websites or contacting the relevant regulatory body.