Monday, June 24, 2013

INVESTING IN INVESTOR AWARENESS !

“Financial literacy and financial inclusion are integral to each other and are important because they are integral to attacking poverty. They are two elements of an integral strategy; while financial inclusion provides access, financial literacy provides awareness”.

- Dr. D. Subbarao, Governor, RBI at the RBI-OECD-World Bank Regional Conference on Financial Education in New Delhi.



RBI in its letter dated January 20, 2011, addressed to the Chairman of all regional rural Banks, has conveyed that banks should make ‘investor awareness’ as one of the agenda items in their periodical meetings with their customers at semi urban/rural branches so that more people are covered under the programme. But are they accountable and if so, to whom? is there a periodical report on the utilisation of the specific funds earmarked for this purpose? May be there. But the average investor for whom it is meant, may not be aware of it.

Take a look at the numerous “Funds” created for “protecting” the investors and creating “awareness”, from the investors” money:

1.      By the Ministry of Corporate Affairs, Government of india
a.      Investor Education and Protection Fund, MCA, GOI
2.      By the Regulator:
a.      Investor Protection and Education Fund, SEBI
3.      By the Stock Exchanges:
a.      Investor Protection Fund, NSE
b.      Investor Protection Fund, BSE
4.      By the Depositories:
a.      Investor Protection Fund, NSDL
b.      Investor Protection Fund, CDSL
5.      By numerous Regional Stock Exchanges – RSEs

These funds are created out of own funds, contribution from Government and various other sources including the contribution from:


(a)
amounts in the unpaid dividend accounts of companies;

(b)
the application moneys received by companies for allotment of any securities and due for refund;

(c)
matured deposits with companies;

(d)
matured debentures with companies;

(e)
the interest accrued on the amounts referred to in clauses (a) to (d);

(f)
grants and donations given to the Fund by the Central Government, State Governments, companies or any other institutions for the purposes of the Fund;

(g)
the interest or other income received out of the investments made from the Fund
Securities and Exchange Board of India (SEBI) has issued SEBI (Depositories and Participants) (Amendment) Regulations, 2012 on 11th September, 2012. According to these Regulations, Depositories are required to establish and maintain an Investor Protection Fund (IPF) for the protection of interest of the beneficial owners and every depository is required to credit twenty 5 % of its profit to Investor Protection Fund. The norms towards contribution to and the utilisation of IPF are yet to be specified.

During the quarter ended 31st March, 2013 NSDL has calculated IPF contribution of Rs. 8.63 lakhs being 25% of the annual profits of the company before tax, available after making such contribution.

CDSL has transferred Rs. 13.26 Crores to the IPF in 2012-13 as per their website.

Stock Exchanges do collect and transfer to this Fund. It is estimated to be in the region of Rs. 1,000 Crores.

These Funds are supposed to be used for the following purposes among various other related purposes:

1) The Fund shall be utilised for the purpose of protection of investors and promotion of Investor education and awareness in accordance with these regulations.
(2) Without prejudice to the generality of the object in sub-regulation (1), the Fund may be used for the following purposes, namely:-
(a) educational activities including seminars, training, research and publications, aimed at investors;
(b) awareness programmes including through media - print, electronic, aimed at investors;
(c) funding investor education and awareness activities of Investors’ Associations recognized by the Board;
(d) aiding investors’ associations recognized by the Board to undertake legal proceedings in the interest of investors in securities that are listed or proposed to be listed;

 The Corpus of Rs 1,000 plus Crores can generate revenue of Rs.100 Crores per annum approximately, which translates to Rs. 8 Crores per month. There are many ways this money can be utilised more productively to reach out to a large number of investors, with Rs 25 lakhs to spend on a daily basis!

Conducting investor awareness camps & programs is one way of spreading knowledge. However, invariably it ends up reaching out to the same set of audience, who get bored after a couple of meetings and stop coming. Those who come, look for investment “tips” from the “expert” speaker, than knowledge. What are the other ways this money could be effectively utilised?

1.      A huge online library on investment books. E-books, Journals, magazines, research papers, etc may be created for the benefit of the registered user/investor, free of cost. This will be useful for the younger generation, students, teachers, researchers, house wives, businessmen, retired people, alike.

2.      The investor Associations may be encouraged to come out with better ways to reach out to potential investors in untapped areas. More money should be spent on continuous basis to create, update, sustain and run the website –both in English as well as Vernacular.

3.      Technology may be used to reach out to maximum number of investors at low cost. SEBI, NISM and Exchanges have started this. But there is a long way to go. Simple educational materials can be uploaded in You Tube and Face Book to reach the genext.

4.      Lot of Audio – Visual material can be developed in regional languages, to reach out to the young audience in schools & colleges.

5.      Every school & college can be empowered to have a Finance Club / Stock Lab, with the necessary infrastructure, books, short films, audio books, etc with Trained Teachers.

6.      Finally, there should be a strict ban on conducting Investor Awareness Programs in any Star Hotels!

The basic purpose is to reach out effectively to a large number of new investors at lower cost per investor. Creating a responsible investor is the key to any financial markets and it certainly adds to the depth and breadth of the market, steadily over a period of time. Money is there, everywhere. It’s not at all an issue.  Concerted, dedicated and well-co-ordinated effort is the need of the hour from all the Governmental agencies and Exchanges to achieve this end.




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