The Hindu Business Line : DCA chalks out programmes to protect investors

THE days of `fly-by-night' companies may be numbered as protecting gullible investors becomes a priority with the regulators. Committed to the task of sheltering investors from being lured by such promoters, the Department of Company Affairs (DCA) has now taken up a series of educational and awareness activities, including media campaigns and panel discussions.

To probe deeper into why companies such as these are at fault in paying investor dues, the Department has asked the Institute of Capital Markets to conduct a thorough study. "Besides, knowing the reasons will also help us in plugging the loop holes, if any," DCA officials told Business Line. The Department is expecting the study to be completed shortly.

Elaborating on the initiatives undertaken by DCA, sources said, the department is supporting setting up of a Web site, `Watch out Investors,' which would list all companies that have defaulted in complying with corporate legislations. The Web site is being developed by Prime Investors and Associates.

The Department is now running investor awareness ad campaigns on Doordarshan and will shortly tap private channels as well. These TV spots explain to investors on what to look for before trusting a company. Further, it has been holding panel discussions on issues such as problems arising in mutual funds and situations when a company becomes sick. An investor needs to know his rights, in general, as well as under various statutes, sources associated with investor awareness activities told Business Line. "An investor needs to know the various investor services related procedures, how to read and analyse the information in a prospectus, balance-sheet, letter of offer and other information published by a company," they pointed out.

The Department is working through non-government organisations (NGOs) to educate investors. At present, there are about eight NGOs registered with the department. A 13-member committee to administer investor protection activities funded by the Investor Education & Protection Fund (IE&PF) selects the NGOs. The Department proposes to reimburse those NGOs that take up class action suits and succeed. For the year 2003-04 the amount allocated for investor awareness out of the IE&PF was Rs 3 crore. The IE&PF itself has a corpus of around Rs 200 crore.

Further, the Department is also undertaking capacity building exercise for NGOs in order to fully equip them to undertake such activities. Almost 25 NGOs have made an application to be registered to take up activities for investor protection and awareness.

More Stories on : Regulatory Bodies & Rulings | Investor Protection

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