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SEBI's disclosures and investor protection guidelines explained!

Do you feel safe investing in the stock markets in India? Do you trust the
legal system to protect you against malpractices? Do you know the
legislations and the government or other bodies that act as watchdogs for
investors? Have you heard of Disclosure and Investor Protection guidelines?
If not, read on.

How do we protect ourselves from fraud? The best way to exercise control
over your investments is to have complete knowledge about the stocks in
which you invest. This is where transparency and accurate information from
the corporate world is desired to enable investors to make informed
decisions. Disclosures and Investor Protection guidelines are tools that
empower investors with information and also protect them from cases of
mismanagement like insider trading.

Role of Securities and Exchange Board of India

The primary functions of the Securities and Exchange Board of India (SEBI)
are to protect the interests of investors in the security markets in India and to
regulate the securities market to ensure its orderly operation. With this
objective, SEBI issued the SEBI (Disclosure and Investor Protection)
Guidelines, 2000. SEBI uses these guidelines as a yardstick to ensure that
investor interests are protected. The Disclosure and Investor Protection
guidelines apply to the primary market, i.e., public issues made by listed and
unlisted companies, rights issues, and offers for sale by listed companies in
certain cases.

The Securities and Exchange Board of India was established on April 12, 1992 under the
Securities and Exchange Board of India Act, 1992.
It protects the interests of investors in securities and promotes the development of, and to
regulate the securities market and for matters connected therewith or incidental thereto.
As a result of its intervention a number of companies which are practicing unfair trade
practice have been controlled !!

SEBI (Disclosure and Investor Protection) Guidelines:

These guidelines include instructions for eligibility standards for companies


issuing securities, pricing of securities to be issued by companies,
requirements relating to promoter contribution, and lock-in period for
securities and more. The guidelines also describe the information that should
be included in offer documents to the public, like a prospectus, abridged
prospectus, and letter of offer.

How does SEBI ensure that the guidelines are complied with?

The Merchant Bankers are responsible for ensuring that all the requirements
of Disclosure and Investor Protection Guidelines are complied with at the
time of submitting the draft offers documents to SEBI. SEBI on its part
evaluates if the guidelines are being followed and all required disclosures are
made in the offer documents.