For an investor freedom movement

Investor protection: two words that have spawned millions of articles and lectures but have lost their meaning. Due to their ignorance, asymmetry of information dissemination and inability to react quickly, retail investors are simultaneously the fulcrum and the victims of shenanigans.

That’s why the minimum investment is deliberately so enticingly small to enable a continuous supply of fresh bali ka bakras . The farce starts at the nomenclature itself. There are no small or big investors — only knowledgeable and ignorant.

If you are big and ignorant, then you can take the hit. If you are small and ignorant , then why the hell did you come into the market directly? If for quick gains, then be prepared for even quicker losses and no tears need be shed on your behalf.

But the ignorant investor has yet to forget the syndrome of listing-day profits . In the 1990s, the at-par highlight fooled everyone, including you know who.

The investor has also been inveigled into the web by the dangling of 100% tax exemption on dividends that actually benefits the promoter-netaclass . If dividends are exempt, why not bank interest? Risk? What risk? Then why was a Rs 7,000-crore scam neatly salvaged ?

So that difficult questions were not asked? The at-par story is still being played out today in the listing gymnastics enabled by a ridiculous price band, 100% margin and a closed syndicate that kills any iota of price discovery. If full current price discovery is allowed, then only long-term investors will come in. But this does not suit the promoter-intermediary-fixer-operator mafia. The grey market is enabled by regulations!

Vanishing companies — a term of the mid-1990 s when capital markets emulated the Bermuda Triangle. The scam was attributed to fly-by-night merchant bankers. While the licence raj was being dismantled in every other sector, a new licence raj was coming up in the unlikeliest of places: the capital market. Before ‘licensing’ , there were hardly half a dozen merchant bankers in the private sector .

Now, suddenly every steel, shipping, pharmaceutical, tyre, cement, engineering and auto company had a merchant banking outfit at the end of its production line.

Merchant banking became the universal byproduct of every activity. On what basis were 1,500 merchant bankers licensed? Sub-standard RTO licences result in traffic accidents, and similar capital market licences result in scams.

Then came the famous demat scam. In 2003, Mapin was introduced, a unique investor identity. First for directors, promoters and corporates, it was to be extended to individuals when, suddenly in 2005, the scheme was scrapped without an alternative. Who was behind the scrapping? Why was it scrapped? Because the primary market was on a roll and scamsters wanted no hindrance.

The scam was facilitated by the scrapping of Mapin. After the scam, PAN was made mandatory, but this could have been done when Mapin was scrapped.

Curiously, even the probe focused on addresses that had more than 500 accounts . How many ‘investors’ , even in a joint family, stay together at one address ? Why was the probe focused on a number as high as 500? Probably because there were cases below that number that involved the high and powerful.

What other conclusion can you draw? Had PAN been made mandatory, there would have been no need for ‘lucubration to examine lugubrious affairs’.

PAN was also deliberately not made mandatory for the stock market in the one-bysix scheme when you needed it for a telephone or even a credit card. The deliberate loophole enabled operators to function unhindered. They just kept each investment below Rs 50,000.

What about the Asba scam? Asba scam? Scams are not just events that happen. Events that should happen but do not are also scams — silent scams. As soon as demat became mandatory, Asba was feasible.

Many had written about it back in 2002-04 — I called it e- lien. All banks may not have been ready — so what — investors could have migrated to those who were.

But the nexus of promoters and bankers stymied this. Where did the investor protection mantra disappear? Every paisa of interest earned by promoters on IPOs, from demat implementation to Asba announcement , actually belongs to retail investors . Are the so-called protection forums even aware of this?

Stock market manipulation is enabled by the lack of free float of 25%. Operators can swing the market at their own sweet will. And now they are smarter — they ensure that the limits of swinging are not breached so that circuit breakers are set off. The shortfall in free float accounts for the helium in the indices.

Market rumours are that promoters are also quietly trying to declassify themselves to conform to the regulation through the backdoor. The fact that there is a rethink shows how powerful the promoter lobby is. The relevant question is: why was the free-float regulation not implemented ab initio?

Investor forums should wake up. There has been a suggestion that they should merge into an independent entity under supervision. ‘Independent’ and ‘supervision’ are antithesis to each other.

Forums must throw off the ‘recognised’ yoke, fund themselves and be the masters of their destiny. If regulators are independent , then why should private forums be dependent? They must stop only depending on the regulator for protection and start thinking for themselves and freely use PILs and RTIs if necessary.

Look at the joke called the abridged prospectus — a sure cure for insomnia — has any forum thought about doing something concrete? Babudom’s present version is a smashed car-size truck and they say: read this and invest!

And how about a real tough exam for retail investors before being allowed to open a demat account? Those who fail will have to continue to read this in small print — mutual fund investments carry market risk please read the offer document carefully before investing — in five seconds.