'62% Players Are Unregistered'
A recent study conducted by Price Waterhouse about the domestic capital market has revealed that an overwhelming 62 per cent of the intermediaries (selling various financial products) are not registered with the Securities and Exchange Board of India (Sebi). A copy of the report has been submitted to the market regulator.
The report has squarely blamed the poor distribution network for the dismal state of the capital markets. "What is different in India is the distribution system. The existing system does not service the investors which has eroded their confidence," says the report.
The study, which is the last in the series of the Financial Institutions Reform and Expansion Project (FIRE), was conducted by Price Waterhouse in order to assess the various bottlenecks in the domestic capital market. The study was conducted among the various market players including brokers, sub-brokers and insurance agents across the different parts of the country.
The report has expressed surprise at the fact that the stock market is still not developed into a sellers market, and, even today, investors have go around scouting for the right investment avenue.
Invariably, the investors have to wait for days on end to find a right investment opportunity. According to the report, the time required to find a suitable investment option has to be reduced for the smooth functioning of the stock market.
The respondents to the study stressed the need for having a detail course for the stock market intermediaries.
Of the 38 per cent intermediaries registered with Sebi, over 64 per cent suggested that for the capital market to do well, the pre-requisite is training.
Every intermediary involved in the selling of financial product must have the knowledge of the business.
The report states that the Indian market is very fluid in retail financial intermediation. There are all kinds of market intermediaries including brokers, sub-brokers, insurance agents, states the report. These retail intermediaries deal in a wide range of products and therefore play multiple roles. These roles must be clearly defined, and there should also be a clear demarcation of responsibilities.
"A majority of these intermediaries are unknown, unregistered and therefore outside the control of the regulatory authority," the report says.
The report further states that it is important for the market regulator has complete details about these intermediaries including the assets of the individual.
The report has further expressed surprise in the manner in which the intermediaries go about selling these products.
It says that only a small portion of the intermediaries canvas for new business and a substantial portion of these intermediaries do business when their clients calls them.
The report says that in the other parts of the world, securities are sold by these intermediaries based on their knowledge and expertise.