Millennium Post

‘Firms won’t get to harm investors during IPOs’

Market regulator SEBI has said it plans to undertake several reforms to develop equity culture in the country, but will not allow companies to raise funds through IPOs if their intentions are unclear and investors' interest is compromised.

Listing out the steps being taken for the benefit of the markets and investors, Securities and Exchange Board of India (SEBI) chairman U K Sinha said that these measures would seek to balance the need of retail investors and the need for encouraging more people to invest in the equity market.

'These are all far-reaching reforms so far as expanding the equity culture is concerned. And, most importantly, this is not the end of it, we will consider many more reforms,' Sinha said.

To safeguard the interest of investors, Sinha said, SEBI has decided to reject those IPOs (Initial Public Offers), about which the regulator is 'not very sure that the intention is clear, the data and information is clear...'

Asked about the need to expand the equity culture in the country, Sinha said: 'SEBI has to balance the needs of the retail investors and also the need to encourage people to invest in the equity market.

'Both have to be balanced. So, in the past one year, we have been guided by these two considerations very seriously and then made our moves,' he said, while listing out measures like additional incentives to mutual funds for going beyond top 15 cities.

'We were noticing that inflow into the industry was shrinking from beyond these top cities. So, exactly the point you are making, that how to encourage the people to acquire the equity culture, we have taken this step,' SEBI chief said.

'We want an equity culture, but we want an equity culture where people invest on a long term basis.

'Because if people invest on short-term basis, and there is lot of churning and buying and selling activities and in the process ending up paying more to the distributors rather than earning for themselves more benefits, we are trying to curb that tendency,' he said.

At the same time, Sinha said, pension is another area where reforms are necessary for developing an equity culture. 'The world over, equity market has developed on the back of pension reforms and that is missing in India... It is not only about PFRDA, even the EPFO should permit the funds to invest in the securities market. Large pension funds from across the world are coming to invest in India, but our own funds are not investing,' he said.

Sinha said Sebi has allowed an entirely new set of distributors like retired bankers, school teachers and retired government servants to sell mutual funds.

'So, we have a simplified set of requirements for  spreading the equity culture. At the same time, to safeguard the interest of investors, we have said that they cannot sell complex products,’ he said.

‘That is another measure towards this balance between equity culture and the safeguarding of investors’ interest.
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