India’s rank in the area of ‘minority investors protection’ improved to four, from 13, on the back of several policy changes undertaken by market regulator Sebi to increase investor protection and market integrity. On the investor protection front, Sebi enhanced norms in the area of governance. It mandated companies to formulate and disclose a dividend distribution policy. It extended the applicability of business responsibility reporting (BRR) to the top 500 listed companies. Under BRR, companies have to disclose their performance in areas such as social, environmental and economic responsibilities. Sebi also asked firms to migrate to new Ind-AS accounting standards and to disclose and obtain minority shareholders’ approval on profit-sharing agreements between private equity funds and promoters, directors or key managerial personnel of listed investee company. It also provided relaxation to banks and other lenders in case of bankruptcy and insolvency. To safeguard minority investors, Sebi imposed restrictions on fundraising by ‘wilful defaulters’.
Sebi, along with market intermediaries such as mutual funds and stock exchanges, conducted investor education and awareness programmes.“The improvement in the rank is on account various regulatory changes that happened over the past one year. Some of them include new insolvency norms, increased rights for minority investors. The government and the regulators are also pro-actively learning from global best practices. However, there are still a few areas that need improvement. Fixing the accountability of auditors, improving regulatory oversight and enforcement,” said Amit Tandon, founder and managing director at Institutional Investor Advisory Services (IiAS). The initiatives taken by Sebi in the area of “ease of doing” business include rationalisation of knowing your customer (KYC) norms, increasing the number of arbitration centers and simplifying FPI (foreign portfolio investor) norms for investing in the debt market.