Investor groups for easier refund norms, demand participative procedure

Investor groups have sought easier regulations for recovery of losses suffered due to malpractices in the securities market.

Pointing out that recovered money seldom returns to the rightful owner, they said the procedure should be amended to make it more participative for those affected, and rules for restitution should be made simpler.

The feedback comes on the back of a report last month, in which a high-level committee under the chairmanship of Justice Anil R Dave looked at enforcement issues, including restitution. It had also sought comments from the public.

Losses should also cover compensation for non-compliance with listing agreements, such as not filing results on time or becoming untraceable after raising money (so-called ‘vanishing’ firms), according to Virendra Jain, president of Midas Touch Investors Association.

 

A copy of the letter — written following the Dave committee report — has been seen by Business Standard. Investors in firms whose actions result in suspension or compulsory delisting should also be considered for restitution, said the organisation.

It added that compensation should be decided upon by including investors in the process. “It should be made mandatory to make investors, who may have suffered losses, a party in the proceedings,” it said.

Investors who have been defrauded in collective investment schemes may not always be aware of compensation being obtained via disgorgement, noted Santosh Kumar Agarwal, president, Bhopal Stock Investors Association.

He pointed out that in the case of the Sahara group, only a small portion of the recovered amount made its way to investors. A report in February suggested that investors claimed less than Rs 100 crore out of Rs 22,000 crore deposited by Sahara group with the regulator. 

The 424-page report had also sought to introduce clarity in the method by which investors’ gains or losses are calculated.