Sebi proposes risk-o-meter for retail junk bond issuances

The Securities Exchange Board of India (Sebi) on Wednesday proposed that there should be a ‘risk-o-meter’ in junk bond issuances to warn retail investors about the risks involved, so that they are not misled by the high coupon these papers offer. 

The proposal is part of a consultation paper and not a rule yet, but riskometer is a standard practice in the mutual fund sector. 

Noting that in public issuances, advertisements focus mainly on coupon “which lures the retail investors to invest”, the capital markets regulator said investors also get confused as below-investment-grade companies club different instruments, secured and unsecured,