Welcome to the market. But enter only if you can take risk’

What about regulation and ensuring a level playing ground?

Having given options to the investor, I have to ensure fair play. Nobody can be an astrologer or can work out the ingenuity of a single individual, therefore world over there are systems and processes to ensure fair play. I need to reduce the risk of the market. There are three kinds of risk – operational, systemic and structural. Let us take an example of an operational risk. The working of the settlement system could pose an operational risk. We have made the settlement system in India world class, on several counts we are ahead of the world. We settle trade in a T+2 cycle and given the sub-continental nature of the country and the volume of trade, we need robust systems. All these are in place.

What about policing?

The SEBI Act gives me four powers: I can levy fines, I can suspend licenses of market players, I can debar the person from the market and I can launch a prosecution. In the last year we have passed 561 orders of which more than 360 were punitive orders, we have cancelled licenses, debarred players from the market and launched criminal prosecutions on both intermediaries and corporates.

But the directors of the ‘vanishing companies’ are still walking around.

I am not a policeman. I can debar them from the market, I can’t jail them, this is beyond my power. I can file an FIR and I can take them to court and we have done that. If they are around, it is for the court to act. One of the pillars of infrastructure of a liberalised capital market is an efficient judiciary.

Is the current bull run for real? Or will the investor experience the scams again?

My advice is: understand that trading in the securities market has risk. Before you take risk, please gather information and then take informed decisions. I cannot make a judgement on the market but I can say that the markets are efficient.

The IPO market is going to boom again. How will the investor’s experience be different this time?

We have upgraded our disclosures and investor protection systems. There are strict entry barriers now on net worth and the disclosures are very stringent.

You say that we should take the mutual fund route, but the funds are geared to the needs of the big ticket investors, in terms of differential loads and practices like dividend stripping.

The first thing to understand is that mutual funds will reflect the market performance. They also carry risk. To help investors compare returns, I have introduced the concept of benchmarks. Look at the relevant benchmark to evaluate performance. As far as the other issues are concerned, I think the reforms in the funds have been greater than those in the rest of the market. We have been asking the CEOs of AMCs to bring down costs, we have stopped practices like front-running.

SEBI has begun an investor education drive, what is the response, isn’t it true that most people want investment advice and not education?

The response to the Investor Clinics has been very good. It is true that people want advice, but all we say in the programme is that there is a risk-return trade off in the market, you should choose your risk keeping your risk-bearing capacity in mind and then choose products. When you go to buy a dress, don’t you look at the cloth, the feel, the colour, the fit and then buy. Do the same with your money. Give this more time and thought. In case you have no time, go to the experts, like portfolio managers and mutual funds. We have been speaking to the HRD Ministry to introduce financial literacy in the school curriculum.

Your advice to the investors

All trading is done through intermediaries, it is your job to make sure that you are dealing with a SEBI registered broker or entity. DO NOT go to anybody outside the exchange to carry out your trade. My advice is that if you want to come to the market – welcome, there are opportunities here, but these have risk. DO NOT be led by the hype about the market or the securities. If you have no time or capability take the help of experts.