Safeguarding investors

21 Mar 2024
Safeguarding investors

Opinion: C S Mohapatra.

Investor education is crucial for enhancing financial well-being. Enhanced opportunities and increased volatility, calls for fresh financial literacy efforts, as traditional programs may no longer suffice.

The curriculum needs updation to cover digital literacy, new investment risks, evolving financial structures, and governmental measures for investor protection and fraud prevention.

While progress has been made in investor protection, challenges persist.

Grassroots engagement through tailored workshops and digital outreach, coupled with long-term sustained handholding specifically of poor and rural households through protection of investors from imminent mis-selling to minimize frauds and vulnerabilities are needed to be followed by financial inclusion efforts.

The Financial Stability Development Council envisages financial education and financial inclusion as the twin objectives to promote prudent financial behaviour and informed investing, thereby optimizing financial well-being.

Dedicated funds such as IPEF of SEBI, DEAF of RBI and IEPF of IEPFA, MCA are also available for the purpose.

The IEPFA, in addition to promoting investor education and protection, is responsible for refund of unclaimed shares, dividends, matured deposits/debentures etc.

In India, to safeguard investor interest, regulatory bodies have set up grievance redressal mechanisms to handle stakeholder concerns. RBI’s ‘Complaints Management System (CMS)’, SEBI’s ‘SCORES’ (SEBI Complaints Redress System), IRDAI’s “Integrated Grievance Management System” (IGMS) and PFRDA handles pension matters through its website and helpline.

Trustworthy advisors

Given the instances of fraud, investors need to rely on trustworthy and registered financial advisors and carefully verify the latter’s credentials to protect themselves from financial frauds.

A simple unbiased, efficient system and timely redressal of complaints is of paramount importance in the context of building investor confidence in protecting their interests.

Sustaining a secure financial environment in this fast-changing scenario alongside robust governance and transparency standards, are necessary in enhancing the security and accessibility of investment opportunities. The ambit of intricate job of investor protection, extends beyond the regulatory frameworks and government interventions, casting investors themselves in a pivotal role.

This two-way process underscores the notion that while authorities strive to build robust safeguards and modern educational platforms, the onus equally falls on investors to navigate their financial journeys with discernment and prudence. Investors are encouraged to temper their aspirations with realistic expectations, exercising restraint over the allure of high returns without due diligence.

Protecting investors interest is not just a regulatory responsibility but a foundational element of the economic ethos. Financial policies, products and processes for investors need to be simple and accessible to the unserved/underserved.

Secure financial system

A focused approach, where regulatory investor protections are complemented by investor education and vigilance, forms the bedrock of a healthy, secure, and thriving financial ecosystem.

By fostering this dual responsibility, India will witness a more resilient and empowering investment landscape, where consumers are not just passive recipients of protection but active participants in safeguarding their financial futures.

Timely steps towards a well-coordinated and comprehensive investor protection strategy that integrates into the National Strategy for Financial Education is the call of the hour.

The writer is IEPF Chair Professor at NCAER. Views expressed are personal

Published in: The Hindu Business Line, 21 Mar 2024