No mechanism to compensate investors in suspended firms: FM

There are provisions to safeguard the interests of investors in stocks, including suspension of erring companies, but there is no mechanism for compensating them as the exchange is a private entity and trading involves risk, Finance Minister P Chidambaram said on Friday.

Between April 2009 and February 2013, 1,125 companies were suspended from trading mainly due to non-compliance with the listing agreement and non-payment of listing fees, he told the Lok Sabha during Question Hour.

Asked how the loss incurred by an investor who put his money in a company that was later delisted can be recovered, he said, "The suspension comes into effect after 21 days. The shareholder can exit in this time period."

He accepted that in case of suspension of a company the shareholder would be affected but the government cannot do anything if the investment was made in a company that failed to comply with the rules.

"Stock exchange is a market place, it is a private entity. Sebi is the regulator. In a market place, there will be some who will not comply. There is no mechanism by which the government can compensate the shareholder. The market is based on speculation and risk," Chidambaram said.