Investing Beginner's Guide PDF

First steps to investing A Beginner’s Guide Save prudently…..Invest wisely GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS (Under the aegis of Investor Education and Protection Fund) 1 Editor Prithvi Haldea PRIME Database Second Ed...

First steps to investing A Beginner’s Guide Save prudently…..Invest wisely GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS (Under the aegis of Investor Education and Protection Fund) 1 Editor Prithvi Haldea PRIME Database Second Edition – June,2011 2  First steps to investing A Beginner’s Guide TABLE OF CONTENTS Chapter Topic Page No. INVESTOR EDUCATION AND PROTECTION FUND 6 Investor Related Websites 6 iepf.gov.in 6 watchoutinvestors.com 6 investorhelpline.in 6 Become an Informed Investor 6 1 WHY IS INVESTING IMPORTANT? 7 Savings v/s Investing 7 Power of Compounding 7 What should be the investment objectives? 7 Investor Age and Asset Allocation 8 Individual Category and Selection Criteria 8 FIRST TIME INVESTING 9 2 CAPITAL MARKET 9 EQUITY SHARES 9 DEBENTURES/BONDS 9 Purchasing Securities in the Primary Market 10 Initial Public Offering (IPO) 10 Further Public Offering (FPO) 10 Dos for Investing in IPOs/FPOs 10 DON'Ts for investing in IPOs/FPOs 10 Purchasing Securities in the Secondary Market 10 DOs for investing in the secondary market 10 DON'Ts for investing in the secondary market 11 INDICES 11 DEPOSITORY SYSTEM 11 Process for becoming a capital market investor 11 Rights as a shareholder 12 Rights as a debentureholder 12 MUTUAL FUNDS 12 Some mutual fund schemes for the first-time investors 12 Purchasing mutual fund schemes 13 DOs for investing in mutual fund schemes 13 DON'Ts for investing in mutual fund schemes 14 3 COMPANY FIXED DEPOSITS 14 Rights of depositholders 14 3  DOs for investing in company fixed deposits schemes 14 DON’Ts for investing in company fixed deposits schemes 14 4 PENSION PRODUCTS 15 New Pension System (NPS) 15 Annuity/Pension Policies/Funds 15 5 INSURANCE POLICIES 15 Term Life Insurance 15 Endowment Policies 15 Annuity / Pension Policies / Funds 15 Units Linked Insurance Policy (ULIP) 16 6 GOVERNMENT SCHEMES 16 National Savings Certificates (NSC) 16 Public Provident Fund (PPF) 16 Post Office Scheme (POS) 16 Infrastructure Bonds 16 Kisan Vikas Patra (KVP) 16 WHERE NOT TO INVEST 7 DON’T INVEST IN DUBIOUS SCHEMES 17 MONEY CIRCULATION SCHEMES (MCS) 17 MULTI-LEVEL MARKETING SCHEMES (MLM) 17 NETWORK MARKETING (NWM) 17 SELF EMPLOYMENT YOJANA (SEY) 17 CHIT FUNDS 17 DEPOSITS 17 PRIVATE PLACEMENTS 17 PLANTATION COMPANIES 17 Caution for the general public 17 8 EDITOR’S 20 MANTRAS TO WISE INVESTING 18 9 INVESTOR GRIEVANCE REDRESSAL 20 Ministry of Corporate Affairs 20 Securities and Exchange Board of India 20 Stock Exchanges 20 Reserve Bank of India 20 10 INVESTOR ASSOCIATIONS 20 Why become a member? 20 11 ENTITIES AND CONCERNED REGULATORY BODIES 21 MCA OFFICES FOR INVESTOR GRIEVANCES REDRESSAL 22 ACKNOWLEDGEMENTS & DISCLAIMER 24 4 INVESTOR EDUCATION AND PROTECTION FUND Investor Education and Protection Fund (IEPF), tool to protect themselves from fraudulent/ non- managed by the Ministry of Corporate Affairs, compliant companies, intermediaries and has been established under the Companies Act, individuals. This website is now a national web- 1956 for promotion of investors’ awareness and based registry of such entities. protection of the interests of investors. Activities undertaken by the IEPF include educating and watchoutinvestors.com enables investors to do a creating awareness among investors through fast, efficient and user-friendly search. It seminars and media and funding projects provides investors information on such entities/ pertaining to investor education awareness and persons who have been indicted by various protection. regulators/ courts. This information can be used by the investors/ prospective investors while Investor Related Websites making investments and can also be used for IEPF has also sponsored three websites for the reviewing their portfolio vis-à-vis such entities. purpose of investor education and protection: st As of 31 May 2011, the website had listed over 1,32,000 indicted/non-compliant/non-existent iepf.gov.in entities covering more than 95,000 companies/ This website fulfils the need for an information firms and over 37,000 individuals. These relate resource for small investors on all aspects of the to the orders passed by several regulatory capital market and does it in the small investors’ bodies, such as, BSE, CDSL, CLB, DRT, EPFO, language. IRDA, MCA, NHB, NSDL, NSE, RBI, ROC, SEBI etc. This website presently covers information on IPO Investing, Mutual Fund Investing, Stock Trading, Depository Account, Debt Market, investorhelpline.in Derivatives, Indices, Index Funds, Investor This is a dedicated, free of charge, portal to Grievances & Arbitration (Stock Exchanges), handle investor grievances relating to various Investor Rights & Obligations, Do’s and Don’ts authorities like Ministry of Corporate Affairs, etc. Registrar of Companies, Securities and Exchange Board of India and Reserve Bank of This website is now available in English, Hindi India. Complaints are taken up by the website and 11 major regional languages. for redressal both with the companies and with the concerned regulators. watchoutinvestors.com The best defense against frauds is precaution. Investors can log-in their grievances related to This first-of-its-kind-in-the-world, free public the capital market and company deposits in service arms the investors with a ‘precautionary’ easy-to-fill forms and track progress of their grievance redressal online. Become an Informed Investor Many investors, especially the small investors, do not often possess adequate expertise/ knowledge to take informed investment decisions. Many of them are not aware of the risk-return profiles of various investment products. A large number of investors are not fully aware of the precautions they should take while dealing with the market intermediaries. Many are not familiar with the market mechanisms and practices as well as with their rights and obligations. These are substantially fuelled by the huge rewards that some investments have the potential to offer. At the same time, wrong investment decisions can lead to huge losses too. “Investors Beware” should be the watchword. As all investments have some risk element, this should be borne in mind by the investors. If caution is thrown to the winds, they have only to blame themselves. Investing well has a secret formula – having the right information, planning and making good choices. 5 Chapter 1 WHY IS INVESTING IMPORTANT? Savings v/s Investing accumulated will amount to only around Rs. 33 1.1 Saving is the excess of your income over lakh. Hence, it is always advisable to start your expenditure. Generally, this lies in the savings early to enjoy the benefits of power of savings bank account or in fixed deposits with a compounding. bank. The money is very safe, earning a small rate of interest and it can be in hand as and What should be the investment objectives? when required (high liquidity). On the other 1.5 There are primarily three investment hand, this money could be invested for meeting objectives: safety, returns and liquidity. In ideal long term goals. While some investments may scenario, this means that one would like the rise or fall in value over time, prudent investment to be absolutely safe, while it investments would earn a lot more than the generates handsome returns and also provides banks savings account. high liquidity. However, it is very difficult to maximize all three objectives simultaneously. 1.2 It is important to take into account the effects Typically, one objective trades off against of inflation on your investments. (Inflation is the another. For example, if one wants high returns, rise in prices of goods and services. As the one may have to take some risks; or if one prices of these increases, the value of the rupee wants high liquidity, one may have to goes down and one will not be able to purchase compromise on returns. as much with those rupees as one could have in the last month or last year). Savings rarely beat 1.6 Every person should prepare a statement of the inflation rate; investments can. financial goals covering as many requirements as possible. This is the basis on which the 1.3 In essence, the difference between savings financial plan shall then be prepared. A person’s and investment is that savings is simply idle financial needs depend on the age, stage in the cash while investments help your funds to grow career path, size of the family, needs of the over a period of time. One can meet his short other family members etc. Some of the needs term needs with his savings but to meet his long can be identified with precision while others can term goals, he needs to make investments. only be determined tentatively. There may be Savings primarily help to protect the principal unanticipated needs as well for which provisions while investments help to earn returns beyond will need to be made. If the financial capability the inflation rate. in terms of savings is found to be inadequate to meet all the goals, these would need to be Power of Compounding prioritized. The financial plan is never static; it 1.4 The most powerful tool for creating wealth has to be reviewed from time to time to account safely and surely is the magical ‘power of for the changing circumstances. compounding’. If you park your money in an investment with a given return, and then reinvest 1.7 There are investment opportunities that are those earnings as you receive them, your high on risk and there are investment investment grows exponentially over time. opportunities that are low on risk. Each is called Illustratively, if you set aside a sum of say ` an asset class. An investor needs to allocate his 5,000 every month from the age of 25, earning savings to one or more asset classes depending interest at the rate of 10% p.a., in 60 years you upon his circumstances. will have with you funds worth more than Rs. 1 crore. However, if you start at 40 with the same 1.8 The indicative table below charts some amount and rate of interest, the fund instruments vis-à-vis their features. Investment Option Returns Liquidity Safety Active Amount Involvement Required Equity Shares Low to Moderate to Low Yes Medium High High Debentures Moderate Low Moderate No Medium PSU/FI Bonds Moderate Moderate High No Low RBI Tax Free Bonds Moderate Moderate High No Low Debt Mutual Funds Moderate High Moderate No Low Equity Mutual Funds Low to High Low No Low High 6 Investor Age and Asset Allocation asset allocation with 90% to 100% in stocks 1.9 There are no magic tricks to find the perfect would be ideal. Unless you are good at building asset allocation. Perfect asset allocation is not your own stock portfolio, it is advisable to invest the one which will make you rich but rather the through mutual funds or index ETFs. Why one that will fit your profile. One of the key should you select such an aggressive asset factors in determining your investing profile is allocation? Simply because it will be the type of your age. While it is not the only factor to take portfolio with the highest expected yield over into consideration, you can manage your asset time. Investing in bonds at such early age will allocation according to your age. minimize your profit expectancy for nothing. 1.10 Younger investors should be better off with 36 to 50 : This is usually the time of your life a portfolio featuring more stocks with greater where you get a better job (therefore better growth opportunities. Older investors nearing or salary). Try to aim for an asset allocation of already in retirement should prefer portfolios about 75% of equity and 25% of bonds. At your with a greater percentage of bonds (or other age, you still can afford a lot of risk and you fixed income products) with their more reliable should not be shy to take them. The 25% in your revenue streams and a lower proportion of asset allocation will smooth your investment stocks with their associated risks. returns during major crisis but would not slow down too much. 1.11 There are many ways to determine an asset allocation, including several rules of 51 to 65 : During this period, you can start thumb. One common suggestion is to invest seeing your retirement. However, that should not your age in bonds. So, if you are 40 years old, be the reason for you to secure your asset you may use a 40/60 (bond/equity) allocation. At allocation to the maximum either. Since you worst, by such investing according to age, the would not be withdrawing much of your asset allocation might be slightly more investment at that age, you can still handle conservative for the under-40 people and slightly some market fluctuations. Going from a growth more risky than is advisable for those over 60. to a more balanced asset allocation seems logical and as such, a 25%/75% asset allocation 1.12 However, if there was only age to manage, approach would allow you to earn some decent things would be pretty easy. This is far from investment returns while not suffering too much being that simple. In fact, age is only a during market crashes. mathematical data that doesn’t take into consideration your risk tolerance. You might be 66 and older : You will for sure be retired during young enough to support a big market drop as this period of your life. If you have been you will have time to play with you to gain it back investing throughout your whole life, you should but if you are about to have a heart attack when be sitting on a solid nest egg. There are no the market goes down by 5%, you won’t last reasons why you should now risk in the name of until your retirement! higher returns. A more secure asset allocation showing a 90% to 100% bond portfolio would be 1.13 Here is some general advice for various advisable. age groups. Individual Category and Selection Criteria 18 to 35 : While you should not be having much 1.14 Are there any parameters one should look money to invest during this period, this is where at based upon his individual status. On a thumb you should risk the most. Technically, you rule basis, the following could be the selection should not need the money you invest for criteria before making an investment for various retirement for a good 30 years. This is the categories of individuals: perfect time horizon for an investor. As such, an Students Salary Salary Professionals Traders House Retired Earners- Earners- wives Persons Private Government Returns VI VI I VI VI I I Liquidity LI I I LI LI I I Safety I I VI I I VI VI Tax Savings LI VI I VI VI LI LI VI: Very Important I:Important LI: Less Important 7 FIRST TIME INVESTING Chapter 2 CAPITAL MARKET 2.1 Among all investment options available, ownership, including dividend (company’s profit capital market is considered the most distributed to owners). Over the years if the challenging as well as most rewarding. Capital company performs well, other investors would market is a market for securities (equity and like to become owners of such a company by debt), where companies (and government) raise buying its shares. This increase in demand for long-term funds from the public investors, and the shares leads to increase in its price. You where investors can subsequently trade among then have the opportunity of selling your shares themselves in these securities. at a higher price than at which you purchased it. You can thus increase your wealth, provided you EQUITY SHARES make the right choice at the first instance of 2.2 Typically, personal savings of an buying shares of the right companies. The entrepreneur, and if required then contributions reverse is also true! It is therefore important that from friends/relatives are the source of funds to an investor makes an informed choice. start a new business. For a large project, however, as the fund requirements are large, 2.5 Equity is an appropriate investment avenue these will not only require term loans but go for an investor who is prepared to take risks in even beyond that..Thus availability of capital is a order to generate higher returns. Over the long major input for setting up or expanding business term, returns from equity shares at aggregated on a large scale There is a way to raise equity levels have been historically higher than most st beyond oneself or from a limited pool of a small other avenues. (As on 31 March, 2011, the circle of friends and relatives. This is by way of BSE Sensex had generated a compounded raising money from the public across the country annualized return of 17.6 per cent over the last by selling shares of the company. For this 10 years). purpose, the promoter has to invite subscriptions through an offer document which gives full DEBENTURES/BONDS details about the promoters’ track record, the 2.6 There are primarily three types: company, the nature of the project, the business Non convertible debentures (NCD) – Total model, the expected profitability etc. When an amount is redeemed by the issuer at a individual is comfortable with such an specified time investment opportunity, he may apply in the Partially convertible debentures (PCD) – company’s public issue and upon allotment Part of the value is redeemed and the become a shareholder of the company. This remaining is converted to equity shares at a way, through aggregation, even small amounts specified price and time available with a very large number of individuals Fully convertible debentures (FCD) – Full translate into usable capital for corporates. Your value is converted into equity at a specified small savings of, say, even Rs. 5,000 can price and time contribute in setting up, say, a Rs. 5,000 crore telecom plant. This mechanism by which 2.7 Debentures/Bonds are contracts where one companies raise money from the public is called party is the lender (investor) and the other party the primary market. is the borrower (company). This contract specifies the rate of interest, the periodicity of 2.3 Importantly, when you, as a shareholder, interest payments (monthly/quarterly/ annual), need your money back, you can sell these and the maturity date for repayment of the shares to other or new investors. Such trades do principal amount (like 3/5/7 years). The term not reduce or alter the company’s capital. Stock “bond” is used for the debt instrument issued by exchanges bring such sellers and buyers the central and state governments and PSUs together through stock brokers and facilitate while the term “debenture” is used for debt trading. As such, companies raising money from issues from the private corporate sector. These the public are required to compulsorily list their instruments are normally secured/charged shares on a stock exchange which has nation- against the assets of the company, and are wide trading terminals.. This mechanism of required to be rated by credit rating agencies. buying and selling shares through a stock exchange is known as the secondary market. 2.8 Debentures/Bonds are ideal for investors seeking assured and regular income. These 2.4 As a shareholder, you are part owner of the instruments typically offer interest rates higher company and entitled to all the benefits of 8 than bank fixed deposits. Some bonds offer tax -Financial statements benefits to the investors. -Object of the issue -Basis of Issue price Purchasing Securities in the Primary Market -Instructions for making an application 2.9 Initial Public Offering (IPO) is when a ü Use the ASBA process for applying (Under hitherto unlisted company makes either a fresh this, the investor authorizes his bank to issue of shares or some of its existing block in his bank account an amount shareholders make an offer to sell of part of their equivalent to the application money. The existing shareholding for the first time to the money remains in the bank. Upon public. This paves the way for the listing and finalization of the basis of allotment, only the trading of such shares. An IPO of fresh shares is amount equivalent to the allotment amount typically made by a company when it needs is debited to the bank account, and the rest money for growth-expansion or diversification or is freed up). acquisitions or even to meet its increasing ü In case of non-receipt , within due period, working capital requirements. In an IPO the credit to demat account/refund of involving an offer for sale, the proceeds go to application money, lodge a complaint with the selling shareholders. compliance officer of the issuer and with post-issue lead manager 2.10 Further Public Offering (FPO) is when an already listed company makes either a fresh DON’Ts for investing in IPOs/FPOs issue of securities to the public or the existing × Don't be influenced by any implicit/explicit promoters make an offer for sale to the public. promise made by the issuer or any one else An FPO, where fresh securities are issued, is × Don't invest based only on the prevailing bull typically made by a company when it needs run of the market index or of scrips of other money for growth-expansion or diversification or companies in the same industry or scrips of acquisitions or even to meet its increasing the issuer company/group companies working capital requirements. An FPO is also × Don't expect the price of the shares of the the preferred route (over a rights issue) when issuer company to necessarily go up upon the company wants to bring in new investors- listing or forever both institutional as well as retail. It may be pointed out that the FPO route is also being Purchasing Securities in the Secondary utilized extensively by the Government for the Market PSUs for the purpose of disinvestment of 2.12 Secondary market refers to the market government’s holdings. where the issued shares and bonds/debentures are sold and bought among investors through a 2.11 Regarding price of shares offered in an IPO broker of a stock exchange. or an FPO, SEBI does not play any role in price fixation. The issuer company decides the price. In support of this, it is required to give full DOs for investing in the secondary market disclosures in the offer document and also justify ü Before investing, check the credentials of the issue price by parameters such as EPS, PE the company, its management, multiples and return on net worth and fundamentals and recent announcements comparison of these parameters with peer group made by them and other disclosures made. companies. There are two types of issues. In The main sources of information are the one, the company fixes a specified price (called websites of the exchanges and companies, fixed price issues). In the other, the company databases of data vendors, business stipulates a floor price or a price band (within newspapers and magazines 20%) and invite bids from the market to then ü Adopt trading/investment strategies determine the final price (called book building commensurate with your risk-bearing issues). In the case of FPOs, the issue price is capacity as all investments carry some risk, normally at a discount to the current market the degree of which varies according to the price. Some companies, and specifically PSUs, investment strategy adopted offer a discount to the retail investors in both ü Transact only through SEBI-recognized IPOs and FPOs up to a maximum 10%. stock exchanges and deal only through SEBI-registered brokers/sub-brokers Dos for Investing in IPOs/FPOs ü Give clear and unambiguous instructions to ü Read the Prospectus/Abridged Prospectus your broker/sub-broker/DP carefully, with special attention to: ü Insist on a contract note for each transaction -Risk factors and verify details in the contract note, -Background of promoters immediately on receipt. If in doubt, -Company history crosscheck details of your trade available -Outstanding litigations and defaults with the details on the exchange's website 9 ü Ensure that the broker's name, trade time proportional to its market capitalization. The and number, transaction price and most important market index is the broad-market brokerage are shown distinctly on the index, consisting of the large, liquid stocks of the contract note country. In India, we have NIFTY 50 and ü Issue cheques/ drafts only in the trade name SENSEX as the major index. of the broker ü Deliver the shares/depository slip in case of DEPOSITORY SYSTEM sale and pay the money in case of purchase 2.14 Earlier, there used to be physical share within the prescribed time certificates issued, which are now converted to ü Ensure receipt of payment/deliveries within Electronic form. A depository holds securities 48 hours of payout (like shares, debentures, bonds, mutual fund ü Insist on periodical statement of accounts units etc.) of investors in electronic form (demat ü Scrutinize both the transactions and the form) through a registered Depository holding statements that you receive from Participant (DP). It also provides services your DP related to transactions in securities. A DP is an ü Handle Delivery Instruction Slips (DIS) Book agent of the depository through which it issued by the DP carefully. Insist that the interfaces with the investor and provides DIS numbers are pre-printed and your depository services. It is now compulsory for account number (Client ID) is pre-stamped every investor to open a beneficial owner (BO) ü In case you are not transacting frequently, account to apply in IPOs/FPOs or to trade in the use the freezing facility in your demat stock exchange. account ü In case of disputes with the sub-broker, Benefits of availing depository services include: inform the main broker immediately A safe and convenient way to hold securities Immediate transfer of securities DON'Ts for investing in the secondary No stamp duty on transfer of securities market Elimination of risks associated with physical × Don't forget to take account of the potential certificates such as bad delivery, fake risks that are involved in investment in securities, delays, thefts etc. shares Reduction in paperwork involved in transfer × Don't undertake off-market transactions of securities × Don't deal with unregistered intermediaries Reduction in transaction cost × Don't fall prey to promises of unrealistic No odd lot problem, even one share can be returns or guaranteed returns traded × Don't invest on the basis of hearsays, Nomination facility rumors and tips Change in address recorded with DP gets × Don't be influenced into buying into registered with all companies in which fundamentally unsound companies (penny investor holds securities electronically stocks) based on sudden spurts in trading eliminating the need to correspond with volumes or “low” prices or favourable each of them separately articles/stories in the media Transmission of securities is done by DP × Don't blindly follow investment advice given eliminating correspondence with companies on TV channels/ websites/ SMS Automatic credit into demat account of × Don't invest under peer pressure or blindly shares, arising out of bonus/split/merger etc. imitate investment decisions of others who Holding investments in equity and debt may have profited from their investment instruments in a single account. decisions × Don't get misled by companies showing approvals / registrations from Government Process for becoming a capital market agencies as the approvals could be for investor certain other purposes × Don't get carried away with advertisements 2.15 For investing in IPOs/FPOs about the financial performance of The first requirement is PAN companies The second requirements is a bank account The third requirement is demat account INDICES (shares are credited/debited in an electronic 2.13 A stock market index captures the mode) which can be opened with a behaviour of the overall equity market. The ups registered Depository Participant. For more and downs of an index reflect the changing details, visit the websites of the two expectations of the stock market about the depositories: CDSL (www.cdslindia.com) future profitability of India's corporate sector. and NSDL (www.nsdl.co.in) This is achieved by giving each stock a weight 10 2.16 Additionally, for investing in the MUTUAL FUNDS secondary market Select a broker, complete the KYC form and 2.18 Introduction enter into a broker-client agreement to open The capital market is highly complex. The risks a Trading Account rise further for most individuals who neither have the time, skills or resources to select the right RIGHTS AS A SHAREHOLDER securities nor to monitor their investments 2.17 All shareholders have certain rights. subsequently nor to take decisions on exits. Shareholders also need protection; not Selecting securities with growth and income protection for assured growth of their potential from the large number of listed investments but protection from malpractices securities involves careful research and and frauds. SEBI regulates the capital market monitoring of the market, which is not possible and it has laid down guidelines for ensuring for most small investors. Also, the key to rights of the shareholders. For this purpose, it successful investing in the capital market is to monitors all constituents of the capital market- minimize risks which can be done by building a from issuers on one hand to stock exchanges on diversified portfolio, which however requires the other hand and all other intermediaries like substantial capital. stock brokers, merchant bankers and underwriters. For more information, please visit 2.19 Mutual Fund is a professional intermediary www.sebi.gov.in. Please also visit the websites between the investor and the capital market. of the two national-level stock exchanges: BSE- Mutual Fund is an entity which collects funds www.bseindia.com and NSE- from small investors, pools these funds together www.nseindia.com. and with the help of competent professionals invest these into various equity and debt Rights as a shareholder instruments, in accordance with the scheme To receive the shares on allotment or objectives. Investors are issued units by a purchase within the stipulated time mutual fund against their investments. For this, To receive copies of the Annual Report of the mutual funds charge a management fee. the company The profits or losses made by the mutual fund To receive dividends, if declared, in due time are shared with the investors in proportion to To receive approved corporate benefits like their investments. Mutual Funds as such rights, bonus, etc. mitigate to a large extent the shortcomings of To receive offer in case of takeover, direct investing. delisting or buyback To participate/vote in general meetings 2.20 The performance of a particular scheme is To inspect the statutory registers at the denoted by Net Asset Value (NAV). The NAV registered office of the company per unit is the market value of securities of a To inspect the minute books of the general scheme divided by the total number of units of meetings and receive copies the scheme on any particular date. Since market To complain and seek redressal against value of securities changes every day, the NAV fraudulent and investor unfriendly of a scheme also changes accordingly. NAV is companies required to be disclosed by the mutual funds on To proceed against the company, if in a daily basis. default, by way of civil or criminal proceedings Some mutual fund schemes for the first-time To receive the residual proceeds in case of investors winding up 2.21 Mutual Funds offer a wide range of schemes to suit different needs of the investors. Rights as a debentureholder An investor should select suitable schemes To receive interest/redemption in the matching his investment objective. One must stipulated time study the offer document of the scheme To receive a copy of the trust deed on carefully; due care must be given to sections request relating to main features of the scheme, risk factors, initial expenses and recurring expenses To apply before the CLB in case of default in of the scheme, exit loads, sponsor’s track record redemption of debentures on the date of of the sponsor and of fund managers, past and maturity pending litigations/defaults. The past track To apply for winding up of the company if record of performance of the scheme or other the company fails to pay its debt schemes of the same mutual fund is an To approach the Debenture Trustee for important input in the decision making. Though grievances past performance of a scheme is not an indicator of its future performance and good 11 performance in the past may or may not be 2.28 Capital Protection Oriented Schemes are sustained in the future, this still is one of the oriented towards protection of capital but not important factors for making the investment with guaranteed returns. Such schemes typically decision. invest a part of their portfolio into AAA rated bonds in such a way that on maturity, this 2.22 Many investors are tempted to invest in investment equals to 100 percent of the original schemes that are available at a low NAV. capital. The balance of portfolio is invested in Accordingly, they are even drawn towards other assets which offer higher returns. NFOs, which are made available at Rs. 10 per unit. Investors should understand that in case of 2.29 Systematic Investment Plans (SIP) is a mutual funds schemes, lower or higher NAVs of convenient option which offers disciplined similar type schemes of different mutual funds investing. Under SIP, an investor invests a fixed have no relevance. At the entry point for the amount regularly, say every month or quarter. investor in an existing scheme, the NAV reflects Such investments are made at the respective the present value of the underlying assets, and a prevailing NAVs. The investor can redeem his higher NAV in fact shows a comparative high units any time irrespective of whether he has quality of assets. In NFOs, the initial corpus shall completed his minimum investment in that be first invested and the NAV shall then depend scheme. upon the quality of investments. 2.30 Index Funds replicate the portfolio of a 2.23 Growth/Equity Oriented Schemes particular index such as the BSE Sensex or the normally invest a major part of their corpus in S&P NSE Nifty. These schemes invest in the equities, and as such carry higher risks/rewards. securities in the same weightage as in the index. Growth schemes are good for investors having a NAVs of such schemes rise or fall substantially long-term outlook. Such schemes could be in accordance with the rise or fall of the index. focused, for example, investing only in large cap stocks or only in mid cap stocks etc. 2.31 Exchange Traded Funds, popularly known as ETFs, select a market index and make 2.24 Income/Debt Oriented Schemes aim to investments in the basket of stocks drawn from provide regular and steady income to the the constituents of that index. The fund may investors. As such, these schemes generally invest in any or all of the stocks constituting that invest in fixed income securities such as bonds, index but not necessarily in the same proportion. corporate debentures, Government securities and money market instruments. Such schemes 2.32 Gold ETFs are funds where the underlying are less risky, but offer low returns. asset is standard gold bullion of 0.995 purity and the investors’ holding is denoted in units, unlike 2.25 Balanced Schemes offer the middle path the equity mutual fund, where the underlying by combining both growth and income. As such, asset is the stocks of various companies. these schemes invest both in equities and in fixed income securities. These are appropriate 2.33 All Mutual Funds are regulated by SEBI. for investors who do not wish to take excessive For more information, visit www.sebi.gov.in risk and at the same time are also looking for and www.amfiindia.com. some capital appreciation. Such schemes generally invest 40-60% in equity and the Purchasing mutual fund schemes balance in debt instruments. 2.34 A new scheme launched by a mutual fund to collect funds from the investors is called a 2.26 Sector Specific Funds/Schemes invest in New Fund Offering (NFO). Launches of NFOs the securities of a pre-specified sector/industry are usually advertised in newspapers/TV. (like Pharmaceuticals, Software, FMCG, PSUs, Investors can also contact agents and Banks). The returns in these funds are distributors of mutual funds for necessary significantly dependent on the performance of information and application forms. The units of the respective sector/industry. Such funds may existing schemes can be purchased directly give higher returns, but they are also more risky. from the fund itself or from distributors/brokers/sub-brokers/agents. 2.27 Tax Saving Schemes offer tax rebates to the investors under specific provisions of the DOs for investing in mutual fund schemes Income Tax Act. A good example of this is the ü Read the offer document carefully before Equity Linked Savings Schemes (ELSS). investing Pension schemes launched by mutual funds ü Investments in mutual funds may be risky, also offer tax benefits. Such schemes are and do not necessarily result in gains growth oriented and invest pre-dominantly in ü Invest in a scheme depending upon your equities. investment objective and risk appetite 12 ü Note that past performance of a scheme or × Don't get carried away by the name of the a fund is not indicative of the scheme's or scheme/ mutual fund the fund's future performance. Past × Don't be guided solely by the past performance may or may not be sustained in performance of a scheme/ fund the future × Don't forget to take note of the risks involved ü Keep regular track of the NAV of the in the investment schemes in which you have invested × Don't hesitate to approach the proper ü Ensure that you receive an account authorities for redressal of your doubts/ statement for your investments/ redemptions grievances. × Don't deal with any agent/broker dealer who DON'Ts for investing in mutual fund is not registered with AMFI schemes × Don't invest in a scheme just because somebody is offering you a commission or some other incentive, gift etc. Chapter 3 COMPANY FIXED DEPOSITS 3.1 Many companies accept Fixed Deposits § Right to alternatively file complaint in the from investors, typically for short durations of 6 Consumer Forum under the Consumer months to 3 years. These are similar to bank Protection Act, 1986. fixed deposits but entail lesser liquidity and usually carry higher risk and return. The DOs for investing in company fixed attractive returns on such deposits draw many deposits schemes investors to channel their savings into such ü Do check the credit rating assigned by the deposits. This results in mobilization of Credit Rating Agencies to the Fixed household savings for utilization in productive Deposits being considered purposes by the corporate sector. ü Do ignore the unrated Fixed Deposit schemes 3.2 Some key features of Company Fixed ü Do understand the background and Deposits are: credibility of the promoters ü Do choose a company with a better track Fixed deposit scheme offered by a record for similar rated companies company. Similar to a bank deposit ü Do avoid investing in Fixed Deposits of Used by companies to borrow from small companies whose promoters have a investors dubious record The investment period must be selected ü Do realize while investing in Fixed Deposits carefully as most FDs are not encashable that if the company is unable to repay your prior to their maturity money, you may end up losing it, as Not as safe as a bank deposit. Company Deposits are unsecured deposits are ‘unsecured’ ü Do refer to the investor service standards of Offer higher returns than bank FDs, since the company they entail higher risks ü Do lodge a complaint with the concerned Ratings can be a guide to their safety regulator in case the company defaults in repayment of deposits (For listed Rights of depositholders companies, file complaint with SEBI; for § Right to receive periodic interest payments manufacturing companies, file complaint on time. with MCA; for banks and NBFCs, file § Right to receive intimation regarding any complaint with RBI) amendment to the terms of repayment of ü Do state the name of the guardian in the deposits. application, if the deposit is in the name of a § Right to receive the amount of matured minor deposits on time. ü Do always have a nominee for the deposits § Right to intimation regarding unclaimed made by you deposits before transfer to the IEPF. § Right to file complaint in the prescribed DON’Ts for investing in company fixed format before Company Law Board (in the deposits schemes office where the registered office of the × Don’t invest all or substantial part of your company is situated) in case of default in savings in Fixed Deposits repayment of deposits. 13 × Don’t get lured by high interest rates × Don’t invest in companies that care little × Don’t forget to check on track record of the about investor services company × Don’t hesitate to seek regulator’s assistance for any grievance Chapter 4 PENSION PRODUCTS 4.1 New Pension System (NPS): A person can classes in a predefined manner depending on build his retirement corpus during his working the investor’s age. life by regularly contributing (the minimum amount being Rs. 6,000 p.a.) to the NPS till the 4.2 Upon subscribing, the investor is allotted a age of 60. Such contributions are invested by Permanent Pension Account Number (PPAN). the Pension Fund Manager (PFM) the investor The PPAN will remain constant even if the chooses, in the investment option of his choice: investor changes the PFM, his location or employer. The returns earned on the Active Choice contributions would depend on the investment √ Asset Class E (Equity): Invests in index option. Charges are applicable to the NPS funds (the maximum allowed is 50%, the account as prescribed by the regulator-Pension balance has to be in Asset Class G & C) Fund Regulatory and Development Authority √ Asset Class G (Government securities): (PFRDA). For further details, visit Invests in central and state government www.pfrda.org.in bonds √ Asset Class C (non government debt): 4.3 At the age of 60, a minimum of 40% of the Invests in liquid funds of Asset accumulated amount in the account has to be Management Companies, bank fixed used to buy a pension (annuity) scheme from deposits, rated bonds issued by any insurance company from whom the investor corporates, banks, financial institutions, will receive monthly pension. The balance of PSUs, Municipality and Infrastructure 60% in the account can be withdrawn or be used entities. to buy annuity. Auto Choice (Life cycle fund) 4.4 Annuity/Pension Policies/Funds are Under this option, the contributions are products of the insurance companies and offer automatically allocated to the three asset guaranteed income either for life or for a certain period without any insurance cover. Chapter 5 INSURANCE POLICIES 5.1 Insurance, as the name suggests is an Endowment Policies insurance against future loss. Life insurance is Provide for periodic payment of premiums the most common insurance cover for an and a lump sum amount either in the event individual. Life Insurance is a contract providing of death of the insured or on the date of for payment of a sum of money to the person expiry of the policy, whichever occurs earlier assured, or following him to the person entitled to receive the same, on the happening of a Annuity / Pension Policies / Funds certain event. It is a good method to protect your No life insurance cover but a guaranteed family financially, in case of death, by providing income either for life or a certain period funds for the loss of income. Taken so as to get income after the retirement Term Life Insurance Premium can be paid as a single lump sum Lump sum is paid to the designated or through installments paid over a certain beneficiary in case of the death of the number of years insured The insured receives back a specific sum Policies are usually for 5, 10, 15, 20 or 30 periodically from a specified date onwards years (can be monthly, half yearly or annual) Low premium compared to other policies In case of the death, it also offers residual Does not carry any cash value benefit to the nominee. 14 Units Linked Insurance Policy (ULIP) ü Do consider two single plans rather than ULIP is a life insurance policy, providing a joint cover combination of risk cover and investment. ü Do disclose correct information in your The dynamics of the capital market have a application direct bearing on performance of ULIPs. ü Do check and update your policy regularly Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile DON’Ts for an insurance policy and time horizons. Different funds have × Don’t purchase a policy unless you different risk profiles. The potential for understand the concept behind it returns also varies from fund to fund × Don’t buy life insurance unless you need it ULIPs offered by different insurers have × Don’t opt for the cheapest deal without varying charge structures. Broadly the understanding the risk different fees and charges include- Premium × Don’t forget to check for terminal illness allocation charges, Mortality charges, fund benefits management fees, policy/administration × Don’t limit your choice to one insurer charges and fund switching charges × Don’t over-burden yourself with unaffordable premium outflows DOs for an insurance policy × Don’t blindly trust the information that is ü Do review your insurance coverage available online ü Do consider how much life cover you need × Don’t lie in your medical exam and your affordability to pay premium × Don't cancel any current insurance policy ü Do study details of various schemes until you receive a certificate ü Select a policy that suits you in terms of your × Don't do anything to hinder an investigation requirement and premium outflows if you file a claim ü Do get an advice from an insurance × Don't default on your payments which may professional who offers policies of different lead to cancellation at the time of need insurance companies × Don't forget to report accidents and mishaps ü Do go online to get the best quotes and to your insurance company, even if you verify the same before choosing one don't plan on filing a claim Chapter 6 GOVERNMENT SCHEMES 6.1 The Government offers a wide variety of Post Office Scheme (POS) savings/investment products: One of the best Tax Saving Schemes It is available throughout the year National Savings Certificates (NSC) Post Office schemes depends upon the type Popular Income Tax Savings scheme, of investment and maturity period, which can available throughout the year be divided into following categories: Monthly Interest rate of 8% Deposit/Saving Deposit/Time Deposit/ Minimum investment Rs. 100, no upper limit Recurring Deposit Maturity period of 6 years Transferable and a provision of loan Infrastructure Bonds Lock in period of three years Public Provident Fund (PPF) Tax benefit U/S 88 on investments up to Rs. Interest rate of 8% p.a 20,000 Minimum investment limit is Rs. 500 and Any redemption prior to maturity nullifies the maximum is Rs. 70,000 tax exemption Maturity period of 15 years The first loan can be taken in the third Kisan Vikas Patra (KVP) financial year from the date of opening of the Money invested in this scheme doubles in 8 account, or up to 25% of the amount at years and 7 months credit at the end of the first financial year. There is a minimum investment limitation of Loan amount can be returned in maximum Rs. 100 with no upper limit of 36 installments This scheme is available throughout the A person can withdraw an amount (not more year than 50% of the balance) every year from Currently, there is no tax benefit on the 7th year onwards investment under this scheme 15 WHERE NOT TO INVEST Chapter 7 DON’T INVEST IN DUBIOUS SCHEMES Introduction period and that each such subscriber shall, in 7.1 There are several dubious schemes his turn, as determined by lot or by auction or by operating in the market. The promoters of such tender, be entitled to the prize amount. schemes float companies with attractive names. However, there are many such schemes which They start in a particular area and then, on have been misused by their promoters and there attaining saturation of member enrollments, are many instances of the founders running keep shifting over to new areas. While what is basically a Ponzi scheme and promoting the schemes, they get film stars, absconding with their money. politicians, sportspersons etc. at grand functions to impress the public. They engage persuasive DEPOSITS direct marketing agents, print attractive 7.4 Finance Companies take deposits from the brochures, release eye-catching advertisements public, promising them unusually high returns. and hoardings and offer gifts to the investors. Since high returns are unsustainable, ongoing They also use attractive slogans. They also repayments of interest and deposit amounts “honour” their members with titles like Silver depend on continuous and uninterrupted flow of Member or Gold Member. Some of such fresh deposits. At some stage, when the flow of schemes that are designed to entrap the gullible deposits gets stifled, the payments to the public by luring them with the promise of investors stop, leaving them high-and-dry. becoming rich overnight are: PRIVATE PLACEMENTS MONEY CIRCULATION SCHEMES (MCS) 7.5 Many companies offer equity MULTI-LEVEL MARKETING SCHEMES (MLM) shares/convertible debentures/preference NETWORK MARKETING (NWM) shares etc to the public through the private SELF EMPLOYMENT YOJANA (SEY) placement route, often for a “a mega project’ 7.2 By enrollment into such scheme, one gets and promise dream returns. By law, such back some or full initial investment and then securities cannot be sold to more tan 49 keeps gaining financially by enrolling new persons, beyond which the Company is required members. So also the second set of enrollers to come out with a Public Issue under the keeps multiplying and gain financially, luring guidelines of SEBI. every onlooker. Such a system of chain to work endlessly to provide profit to everyone PLANTATION COMPANIES concerned ultimately breaks down at some 7.6 Many companies offer schemes that multiply stage, resulting in big financial losses to many. money by investment into plantations. Most of When a person fails to get his required clients or such companies are not registered with SEBI, enrollers, the promoters of the scheme do not and typically have fled with the investors’ tell about the non-viability of the scheme but monies. blame it as one’s personal failure. Many companies have now disguised into the activity Caution for the general public of marketing goods, services, drugs and health 7.7 Remember that there is no free lunch and care products. that there is some catch when some one offers to make money for you easily and quickly. So CHIT FUNDS any get rich quick scheme or high returns 7.3 Chit fund is a kind of savings scheme under schemes should be suspected. Remember also which a person enters into an agreement with a that these schemes are unsecured, are illegal specified number of persons that every one of and are not regulated by the Government. As them shall subscribe a certain sum of money by such, if you lose money, you will not be able to way of periodical installments over a definite seek any help from the Government. 16 Chapter 8 EDITOR’S 20 MANTRAS TO WISE INVESTING Save prudently…..Invest even more wisely During bull runs, almost all IPOs provide You need to invest, otherwise your savings positive returns on the listing day. If will depreciate in value/purchasing power. investing in an IPO just because it is an IPO However, mindless or reckless investing is during a bull phase, it may be advisable to hazardous to wealth; Please become an exit on the listing date, as you have invested investor… and not a trader or a gambler. without due diligence. However, most such investors put IPOs on a 20 Mantras to Wise Investing pedestal and expect them to perform Mantra 1 forever. That will not happen as an IPO Follow life-cycle investing becomes a listed stock on the listing date, You can afford to take greater risks when and will then behave like that; and only you are young. some will be outstanding. As you cross 50, you should consider If an investor does not book profit on the gradually getting out of risk instruments. listing date, he is either greedy or takes a By 60, you may exit risk instruments. (To wrong call on the company/industry/market. not lose your capital when you have stopped He should then not fault the IPO price or earning new money). There are better things blame regular/issuer/merchant banker. In to do than watch the ticker on TV! any case, he invested in the IPO by choice; it was not forced upon him. Mantra 2 However, if you invest in the IPO of a Read carefully, and take informed decisions company, with due diligence, then do not get Do due diligence; take informed decisions. bothered by immediate post-listing Read about options and processes on performance or volatility. Remain invested iepf.gov.in and visit mca.gov.in for more as you would in a listed stock. information on companies Mantra 5 For example, for IPOs, read about the offer. This is difficult, with the offer documents PSU IPOs deserve special attention now running into more than 1000 pages; PSU IPOs are typically from companies that abridged prospectus too is difficult to read. are profitable and have a significant track Yet, read you must, at least, the risk factors, record and market leadership; also very little litigations, promoters, company track record, risk of fraud. issue objects and key financial data. In almost all PSU IPOs, there is a discount for the retail investors. Mantra 3 Invest only in fundamentally strong Mantra 6 companies Invest in mutual funds, but select the right Invest only in companies with strong fund and scheme fundamentals; these are the ones that will Mutual funds are a better vehicle for the withstand market pressures, and perform small investors, most of whom have little well in the long term. skills or time to manage a personal portfolio. Strong stocks are also liquid stocks. The problem is that there are too many Do not go for penny stocks; you may get mutual funds, and there are too many lured as these rise by 5-10% a day against schemes. Spend time to select the right fund top stocks that rise 5-10% in a year; you will manager and the right scheme/s. typically enter at peak and then make And remember, mutual funds are subject not losses. just to market risks, and that investing in Remember, equity investments cannot be these does not mean guaranteed returns. sold back to the company/promoters. Mantra 7 Mantra 4 Beware of free advice Consider investing in IPOs Too many people in the capital market offer IPOs have been a good entry point. free advice; these come through TV, print media, websites, emails and SMS. Decide whether you are investing in an IPO as an IPO or in the IPO of a company. Don’t act blindly on such advice; remember free advice carries no accountability. 17 Mantra 8 Remember the plantation companies many Don’t get taken in by advertisements of which promised phenomenal returns (in Advertisements are to make you feel good. some cases, 50% on Day 1)! Don't get carried away by attractive Let not greed make you an easy prey! headlines, appealing visuals/messages. Don’t get carried away by upward arrows, Mantra 14 big percentages and deceptive numbers. Don’t borrow to invest Interest mounts by the day; returns don’t Mantra 9 necessarily. Don't get overwhelmed by sectoral Invest within your means. frenzies/bull runs Remember, you can not buy the shares of Mantra 15 the Indian economy or of India Inc. or of a Deal only with registered intermediaries sector… ultimately you have to buy into a There are many unregistered operators in specific company. the market who will lure you with promises Also, sectoral frenzies keep changing. of high returns, and then vanish with your All companies in a sector are not necessarily money or they will mis-sell or they will outstanding. Each sector will have some undertake unauthorized transactions. very good companies, some reasonably Deal with registered intermediaries, it also good companies and many bad companies. allows recourse to regulatory action. Be also careful about companies that change their names to reflect current Mantra 16 sectoral fancy. Don't over-depend upon 'comfort' factors like IPO Grading Mantra 10 Independent Directors Look at the credentials of the entity/person Corporate Governance Awards Many scamsters are waiting to exploit your CSR Activities greed; targeting gullible small investors. Be careful about the entity seeking your Mantra 17 money; visit watchoutinvestorts.com before Don’t take decisions based just on summary investing. accounts Read through the schedules as well as Mantra 11 qualifications and notes to the accounts. Be careful promoters issuing shares/ Check out for “Other Income” and unusual warrants to themselves expenses Many a times, preferential allotments to Look out especially for entries relating to promoters are for the benefit of the related party transactions, sundry debtors, promoters only, at the expense of minority subsidiaries’ accounts, cash/bank balances. shareholders. Mantra 18 Mantra 12 Learn to sell ”Cheap” shares are not necessarily worth Most investors buy and then just hold on buying (Regrettably, most advice by experts on the Price of a share can be low (and therefore media is also to buy or hold, rarely to sell). appear cheap) because in reality the Profit is profit only when it is in your bank company is not doing well; the hype about (and not in your register or Excel sheet). the company/sector and comparison with Don’t be greedy. Leave some profits for the prices of good companies may induce you. buyer too. Remember, you cannot maximize Worse, the price can become low because the market’s profits. the face value has been split (over 500 Set a profit target and sell, unless you have companies have split their shares); rationale good reasons to hold on for very long term. given is to make shares affordable to small investors; not valid as one can buy even one Mantra 19 share; real purpose is to make shares If after all this, you do have a grievance... appear “cheap” Seek help of www.investorhelpline.in. Mantra 13 The final… Mantra 20 Beware of guaranteed returns offers Be honest Be extra careful before investing in any offer Be honest as only then you can demand which promises very high returns. honesty and fight for your rights. 18 Chapter 9 INVESTOR GRIEVANCE REDRESSAL 9.1 The capital market can grow only when Type-I: Refund Order/ Allotment Advise. investors find it safe for them to invest and they Type-II: Non-receipt of dividend. are assured that the rules governing the market Type-III: Non-receipt of share certificates after are fair and just for all the players. For this transfer. purpose, there is an effective mechanism for Type-IV: Debentures. resolutions of disputes and grievances in place. Type-V: Non-receipt of letter of offer for rights. Type VI: Collective Investment Schemes Ministry of Corporate Affairs Type VII: Mutual Funds/ Venture Capital Funds/ 9.2 Ministry of Corporate Affairs (MCA) provides Foreign Venture Capital Investors/ Foreign an efficient and effective grievance redressal Institutional Investors/ Portfolio Managers, framework to address and resolve the Custodians. grievances speedily. Investors can approach Type VIII: Brokers/ Securities Lending any of the officers of the Registrar of Intermediaries/ Merchant Bankers/ Registrars Companies, the Regional Directors as well as and Transfer Agents/ Debenture Trustees/ the Headquarters of MCA with their grievances. Bankers to Issue/ Underwriters/ Credit Rating The complaints are taken up with the respective Agencies/ DP. companies. For complaints relating to areas not Type IX: Securities Exchanges/ Clearing and in the charter of MCA, these are forwarded to Settlement Organizations/ Depositories. the relevant regulator and the investors are also Type X: Derivative Trading advised to approach the concerned regulator. Type XI: Corporate Governance/ Corporate Restructuring/ Substantial Acquisition and 9.3 Investor Grievance Handling & Redressal Takeovers/ Buyback / Delisting / Compliance has acquired a special focus with the with Listing Conditions implementation of MCA21 e-Governance portal, which has a dedicated online facility for filing of Stock Exchanges grievances on www.mca.gov.in. It also has 9.6 The following types of complaints should be ‘online status tracking’ facility to enable monitor filed with the concerned stock exchange: the progress. Complaints related to securities traded/listed with the exchanges. 9.4 MCA also operates an outsourced service Complaints regarding trades effected in the through www.investorhelpline.in. This is a exchange with respect to the companies dedicated portal to handle investor grievances. listed on it. The service provider takes up the redressal of Complaints against the brokers/sub-brokers the complaints both with the concerned of the exchange. regulators as well as with the companies. Reserve Bank of India Securities and Exchange Board of India 9.7 The RBI website-www.rbi.org.in- has a 9.5 In the event of capital market related dedicated facility for investor grievances grievances not resolved by the concerned handling and resolution. All complaints relating company or the intermediary, investors can to banks and company fixed deposits should be approach SEBI at www.sebi.gov.in. The filed with RBI. following kinds of complaints can be filed: Chapter 10 INVESTOR ASSOCIATIONS 10.1 Why become a member? It is often regularly organize education seminars for their difficult for an investor to fight for his rights at an members, in addition to organizing special talks individual level. This can also include settling of by eminent experts. The list of investor investor grievances. It is ideal for an investor to associations/NGOs/voluntary agencies become a member of an investor association, registered with IEPF and SEBI is available on who can take up causes on his behalf. www.iepf.gov.in and www.sebi.gov.in. Moreover, many of the investor associations 19 Chapter 11 ENTITIES AND CONCERNED REGULATORY BODIES 11.1 Given below is a list of types of companies/ intermediaries/service providers/activities in the financial market. The names of the relevant bodies that regulate them and their website addresses are given in the second and the third columns. Type of Entity/Activity Regulatory body Website Auditors ICAI/CAG www.icai.org www.cag.gov.in Banks RBI www.rbi.gov.in Banks –Issue Collection SEBI www.sebi.gov.in Chit Funds REG. OF CHIT FUNDS - Collective Investment Schemes SEBI www.sebi.gov.in Companies –All MCA/ROC www.mca.gov.in Companies –Listed MCA/ROC/SEBI/SE www.mca.gov.in www.sebi.gov.in Company Secretaries ICSI www.icsi.edu Competition CCI www.cci.gov.in Co-operative Banks RBI www.rbi.gov.in Cost Accountants ICWAI www.icwai.org Credit Rating Agencies SEBI www.sebi.gov.in Custodial Services SEBI www.sebi.gov.in Debenture Trustees SEBI www.sebi.gov.in Depositories SEBI www.sebi.gov.in Depository Participants SEBI/NSDL/CDSL www.sebi.gov.in www.nsdl.co.in www.cdslindia.com Foreign Investment Institutions SEBI www.sebi.gov.in Housing Finance Companies NHB www.nhb.org.in Insurance Brokers/ Agents IRDA www.irdaindia.org Insurance Companies IRDA www.irdaindia.org Investment Bankers SEBI www.sebi.gov.in Investor Associations SEBI www.sebi.gov.in Media(Print/Electronic MIB www.mib.nic.in Mutual Funds SEBI www.sebi.gov.in Mutual Fund Brokers/ Agents SEBI/AMFI www.sebi.gov.in www.amfiindia.com New Pension Scheme (NPS) PFRDA www.pfrda.org.in Non-Banking Financial Companies RBI www.rbi.gov.in Nidhi Companies MCA www.mca.gov.in Plantation Companies SEBI www.sebi.gov.in Portfolio Managers SEBI www.sebi.gov.in Registrars/Share Transfer Agents SEBI www.sebi.gov.in Serious Frauds SFIO www.sfio.nic.in Stock Brokers SEBI/SE www.sebi.gov.in Stock Exchanges SEBI www.sebi.gov.in Sub-Brokers SEBI www.sebi.gov.in Venture Capital Funds SEBI www.sebi.gov.in 20  MCA OFFICES FOR INVESTOR GRIEVANCES REDRESSAL MAIN OFFICE Office of Registrar of Companies, Pune Office of Registrar of Companies Mr.A.K.Srivastava,Jt. Secretary PMT Building , 3rd Floor (Gujarat) Ministry of Corporate Affairs Deccan Gymkhana ROC Bhavan 5th Floor, A-Wing, Shastri Bhawan Pune-411004 Opp Rupal Park Society,Naranpura New Delhi-110001 Ahmedabad-380013 Phone: 23383180 Office of Registrar of Companies Fax: 23386068 (Goa , Daman & Diu) Office of Registrar of Companies [email protected] Company Law Bhavan (Rajasthan) EDC Complex, Plot No.21 ,Patto, Panaji Corporate Bhawan, 2nd Floor NORTHERN REGION Goa-403001 G/6-7, Residency Area, Civil Lines Office of Regional Director Jaipur-302001 A-14,Sector-I , PDIL Bhavan EAST & NORTH EASTERN REGION NOIDA Office of Regional Director Office of Registrar of Companies (East & North Eastern Region) (Madhya Pradesh & Chattisgarh) Office of Registrar of Companies Nizam Palace 3rd Floor, 'A' Block, Sanjay Complex Hall Nos. 405-408,Bahu Plaza South 2nd MSO Building,3rd Floor Jayendra Ganj ,Gwalior-474009 Block 234/4, A.J.C.B,.Road Rail Head Complex Kolkata-700020 SOUTHERN REGION Jammu-180012 Office of Regional Director Office of Registrar of Companies 5th Floor Shastri Bhavan Office of Registrar of Companies (West Bengal) 26, Haddows Road (Punjab, Chandigarh Nizam Palace Chennai-600006 & Himachal Pradesh) 2nd MSO Building,2nd Floor Corporate Bhawan 234/4,A.J.C.B.Road Office of Registrar of Companies Plot No. 4-B, Sector -27-B Kolkata-700020 (Andhra Pradesh) Madhya Marg 3-5-398,Kendriya Sadan, 2nd Floor Chandigarh-160019 Office of Registrar of Companies Sultan Bazar, Koti (Orissa) Hyderabad-500095 Office of Registrar of Companies 2nd Floor, Chalchitra Bhawan (Delhi & Haryana) Buxi Bazar Office of Registrar of Companies 4th Floor, IFCI Tower Cuttack–753001 (Kerala) Nehru Place 1st Floor, Corporate Law Bhawan New Delhi-110019 Office of Registrar of Companies BMC Road,Trikkakara ( Bihar & Jharkhand) Kochi-682021 Office of Registrar of Companies, Maurya Lok Complex,Block A, West Wing (Uttar Pradesh & Uttrakhand) 4th Floor,Dak Bunglow Road Office of Registrar of Companies 10/499-B Allenganj, Khalasi Lines Patna–800001 (Karnataka) Kanpur-208002 2nd Floor, E Wing, Kendriya Sadan Office of Registrar of Companies Koramangala, Bangalore-560034 WESTERN REGION (NE Region) Office of Regional Director Morello Building,Ground Floor Office of Registrar of Companies Everest Building,5th floor Kachery Road Tamil Nadu ( Coimbatore) 100 Marine Drive Shillong–793001 Stock Exchange Building,2nd Floor Mumbai-400002 683, Trichy Road,Singanallur NORTH-WESTERN REGION Coimbatore-641005 Office of Registrar of Companies Office of Regional Director (Maharashtra) (North -Western Region) Office of Registrar of Companies Everest Building, 1tst Floor Registrar of Companies Bhavan Tamil Nadu ( Chennai) 100 Marine Drive Opp Rupal Park Society Block 6,B Wing, 2nd Floor, Shastri Bhavan Mumbai-400002 Naranpura 26, Haddows Road Ahmedabad-380013 Chennai-600006 ACKNOWLEDGEMENTS & DISCLAIMER Acknowledgements Disclaimer This Guide has been prepared/ compiled/ Information provided herein is purely for adapted primarily from the information available dissemination of information and creating on the websites of the Ministry of Corporate awareness among the investors about various Affairs (www.mca.gov.in), Investor Education aspects of investing. Although due care and and Protection Fund (www.iepf.gov.in), SEBI diligence has been taken, MCA or Editor or (www.sebi.gov.in), NSE (www.nseindia.com), organizations distributing this reading material BSE (www.bseindia.com) and MCX-SX shall not be responsible for any loss or damage (www.mcx-sx.com), from the reading material resulting from any action taken by a person on provided by ICAI, ICSI and ICWAI, and inputs the basis of the contents of this Guide. It may from the Editor. also be noted that laws/regulations governing the markets are continuously updated/ changed, and hence an investor should familiarize himself with the latest laws/ regulations by visiting the relevant websites or contacting the relevant regulatory body. 21