Although grievance redressal is a notoriously difficult exercise, since several companies are indifferent to investor issues, Midas has already collected several thank-you notes from satisfied complainants. For instance R. Jacob from Visakhapatnam got back the principal on his fixed deposit with Escorts Ltd. Although this is an unsecured deposit, the fact that the Helpline is sponsored by the Ministry of Company Affairs obviously made the difference. Sebi would do well to liaise with the Investor Helpline, to encourage greater redressal and also keep track of companies that plan to raise fresh public funds when they have pending investor complaints.

Information verification. The investor verification process conducted by stock exchanges is flawed. While it conveys the impression that stock exchanges are verifying media reports to make accurate information available to the larger body of investors, it is doing just the opposite. Companies have long since realised that stock exchanges merely act like a post offices when they seek their response to news reports. Consequently, they provide evasive and sketchy replies to stock market queries, which are accepted without a question. Yet, stock exchanges themselves are the first level of self regulation that the Finance Minister alluded to. Companies have also realised that bourses have no way of knowing if they omit to inform them about potentially “price sensitive” information, because there is no verification process.

Dinesh Dalmia of DSQ Software was the first to exploit this when he did not bother to inform the stock exchanges about a 50 per cent increase in his capital through a preferential offer of shares. Interestingly, Sebi has been rather slow in following up such complaints. In one case, a Sebi official told a complainant that Sebi only acts as a post office and seeks answers from the bourses. In that case it is two post offices too many and it only confuses investors. Sebi needs to get serious about enforcing the provisions of Clause 49 of the Listing Agreement of stock exchanges by forcing the bourses to follow through on information, at least when they receive complaints.

... contd.