DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,

VISAKHAPATNAM

CORPORATE LAW

PROJECT TOPIC- RETAIL INVESTORS IN CORPORATE LAW

SUBMITTED TO: DR. DAYANANDA MURTHY C P

SUBMITTED BY: ANMOL GIRI, 2015-010

ANJANI HARIKA, 2015-041
 CONTENT

1. INTRODUCTION……………………………………………………………….1
2. WHAT IS RETAIL INVESTMENT? ……………………………………………..2
3. RETAIL VENTURE INVESTMENT: THE INDIAN SCENARIO……………………3
4. EVOLUTION OF POLICY SCENARIO OF RETAIL INVESTORS IN INDIA…………3
5. INDIVIDUAL SHAREHOLDER RIGHTS………………………………………4 - 8

6. PROVISION TO PROTECT RETAIL INVESTORS UNDER THE COMPANIES ACT, 2013

ARE……………………………………………………………………….…9 - 10

7. ROLE OF SEBI IN RETAIL INVESTOR PROTECTION………………………….11

8. WORKING FOR THE FAIR TREATMENT OF RETAIL INVESTOR……………….12
9. IMPROVING THE CONDUCTIVE POLICY ENVIRONMENT FOR THE RETAIL INVESTOR.12
10. RETAIL INVESTOR AND FIDUCIARY STANDARDS……………………………..13
11. MEASURES FOR IMPROVING THE ENVIRONMENT AND THE INVESTORS………14
12. CONCLUSION…………………………………………………………………..15

SOURCES

ONLINE PORTALS
1. Heinonline.com
2. Manupatra.com
3. Jstor.com
4. SCC.in

BOOKS
1. RAMAIYA’S, GUIDE TO COMPANY LAW
2. R&D, COMPANY ACT, 2013
 INTRODUCTION

An investor is any person who allots capital in a business/ company with a greed of expecting
some financial return out of it. Needless to say, the benefit is double sided, in the sense that the
investor gets his dividends at the end of the financial year or the interim dividends, whereas
the directors of the company receive their capital to run the business proposed1. There are a
varied types of investors in terms of what they invest into the company. There are investors
like angel investors, venture capital, sweat equity investors, retail investors etc.
The Angel Investors focus on the lengths of providing investment to the start-ups,
entrepreneurs etc. They are specifically called the angel investors for an obvious reason that
these “angels” make a high risk investment in the hope of receiving large return. These angel
investors either focus on the status quo of the market at that point of time or they invest in
prospective business that is sure to gain a substantial market share in the future. Angel investors
target new innovative businesses like the one with new technological advancements or the one
that is trending during that period.”
Venture capital investors are the ones who follow due diligence, a process that would consumes
up to five months of time for each such investment. These kind of investments are very rare, at
the ratio of 1 out of a 100 companies. These investors invest millions in a company expecting
a large return on the same for they secure equity shares in the company. They typically work
with the business having a solid high profile return and a robust strategy to conquer the market.
Venture capitalists do not usually invest in the start-ups considering the high factor risk in
them.”
Sweat Equity Investors are the ones who invest their physical capacity to work i.e- their efforts
unlike the financial investments in the form of capital. In partnership firms there might be
partners who contributes to the capital whereas some who only put their sweat equity.”

“This article will include such more details of the retail investment and deep into how to protect
their interest and to see their relevance in various other aspects.”

1
Kobi Kastiel; Yaron Nili, In Search of the Absent Shareholders: A New Solution to Retail Investors' Apathy,
41 Del. J. Corp. L. 55 (2016)

1
 WHO IS A RETAIL INVESTOR?

“In any sort of the financial markets, investments and the confidence of the investor has got
paramount importance. Without the large chunk of investments and faith of the investors, no
market can develop or succeed. In this regard, SEBI give more emphasis to various measures
including the fairness and transparency, safeguarding client’s money, component and honest
service and market integrity. SEBI has also made many provisions to the investors so that they
can educate themselves and also get their grievances redressed. This chapter discusses the role
of SEBI as a regulatory body to provide investor protection and education. It also traces other
organizations which play important role in this Retail speculators contribute considerably littler
sums than vast institutional financial specialists, for example, shared assets, annuities and
college gifts, and exchange less as often as possible. Be that as it may, wealthier retail financial
specialists would now be able to get to elective speculation classes like private value and
mutual funds.”
Experts say littler financial specialists don't have the skill to look into their ventures.
Subsequently, they undermine the monetary markets' job in distributing assets productively;
and through swarmed exchanges, cause freeze offering. These unsophisticated investors are
said to be defenseless against conduct against the market and may think little of the intensity
of the majority that drive the market.”

Retail financial specialists do affect advertise language. Indicators of financial specialist

opinion incorporate common reserve streams, the first day execution of Initial Public Offerings
and study information from the American Relationship of Individual Investors, which
questions retail financial specialists concerning their desires for the market. Opinion is likewise
followed by stockbrokers like TD Ameritrade and E*TRADE.”

The retail investors advertise in the United States is tremendous. More than 50 million families
are retail financial investors or the like and more than half of family units have bank accounts
or speculation plans like 401(k)s. And keeping in mind that Americans inclined toward bank
accounts and detached putting resources into the outcome of the money related emergency, the
quantity of family units which claim stocks is rising once more. As indicated by the Central
bank's study of buyer accounts, 54% of family units claimed stocks in 2017.”

2
Retail investors presently approach more money related data, venture training and exchanging
devices than at any other time. Financier charges have fallen, and versatile exchanging is
empowering speculators to effectively deal with their portfolios from their PDAs or other cell
phones. A gigantic scope of retail assets and dealers have least venture sums or least stores of
a couple of hundred dollars, and a few ETFs and robo-counselors don't require any. All things
considered, in any case, the basic focus of the investors still remain about getting your work
done.””

RETAIL VENTURE INVESTMENT: THE INDIAN SCENARIO

A review of family unit sparing and investment conduct led in 2011 by NCAER found that
families putting resources into securities, debentures, value instruments, common assets and
subsidiaries totalled 24.5 million and established 10.74 for each rupee of all family units in the
nation. The scope of nuclear families was about 21 for each rupee in urban territories and 6 for
every rupee in provincial regions; the differential in the extent can be straight forward
connected to monetary proficiency. Notwithstanding, the inquiry that remaining parts is how
much families in India have stopped their monetary investment funds in instruments
specifically or by implication connected to the stock exchange. Information reflections indicate
clear proof of the common sense hazard loath nature of Indian speculators since
notwithstanding the net monetary sparing rate expanded to 7.7 for each penny of gross national
extra cash (GNDI) in 2015-16 from 7.5 for every penny in 2014-15 and 7.4 for each penny in
2013-14, the add up to share of reserve funds in offers and debentures was just 0.7 % of the
Gross budgetary sparing. The truth of the matter is the family unit's investment funds are
significantly in physical property i.e. half and there's a requirement for channelization of
physical investment funds towards budgetary reserve funds.”

EVOLUTION OF POLICY SCENARIO OF RETAIL INVESTORS IN INDIA

In order to understand properly the way the business is expanding over the Till August 2003,
under the SEBI (Disclosure and Speculator Protection) Guidelines,2000, a retail financial
investor was characterized as an individual applying for acknowledgement of 10 or less
attractive lots in a fixed issue or to 1000 units in a book fabricated issue.”

3
Since the prices in IPOs from various firms can shift, definition dependent on number of offers
connected for does not consider the volume of speculation made in a specific IPO by the
financial specialist concerned, however that is a vital factor recognizing the character of various
financial investors.”
To assess risk, the retail speculator was in this way reclassified to show his/her decision of
stock by its value. In August 2003 the definition was revised to incorporate every single
individual financial specialist applying for securities worth Rs. 50,000 or less, with that value
being hence amended to Rs. 1,00,000 in March 2005 and joined in the SEBI-Issue of Capital
and Disclosure Requirements Regulations, 2009 and afterward to Rs. 2,00,000 in November
2010. The increments were mostly with the motive to balance the increase in the prices. While
such definitions have been utilized to target concessions to the retail speculator, examining the
conduct of financial specialists outlined based on these definitions is troublesome, on the
grounds that far reaching data on retail financial specialists recognized in this way is rare. In
this manner, retail residential financial specialists ought to be viewed as a noteworthy segment
which can advance a level of steadiness in the market but since of low retail-speculator base,
the advantage of the share trading system blast isn't known to have released a flood of
flourishing among customary urban class that such increment in corporate profit and their offer
values bring when in doubt, in more created world.2”

INDIVIDUAL SHAREHOLDER RIGHT

“There are two kinds of rights for a member of the Company, namely Individual membership
rights and corporate membership rights. An individual membership right is a right to
maintain himself in full membership with all the rights and privileges appertaining to that
status.3”
“The individual membership right insists on strict observance of legal rules, statutory
provisions and provisions under MOA and AOA. Where corporate membership rights are
concerned, a shareholder can assert those rights only in conformity with the decision of the
majority of the shareholders.4”

2
Gopalkrishnan, Shankar and Srinivasa, Priya, Corporate Retail: Dangerous Implications for India’s Economy,
(2009)
3
“ R.R. Drury, The Relative Nature of Shareholders Right to Enforce The Company Contract, 45 C.L.J. 285
(1986).”
4
“Tony Tan, Corporate Governance in India: The Rise of Minority Shareholder, available at, www.SSRN.com”

4
The Supreme Court in landmark case, Life Insurance Cooperation of India V. Escorts Ltd. &
others5 observe certain fundamental rights of shareholders which are as follows:

 To elect directors and to participate in the management through them.

 To enjoy the profit of the company in shape of dividends.
 To apply to the court for relief in case of oppression and mismanagement.
 To apply to the court for winding up of company.
 To share the surplus on winding up of the company.”

“As Hohfel6, analysed that right is always corresponded by duty so it is important to understand
right in relation to duty. In general sense Rights are legal, social, or ethical principles of
freedom or entitlement; that is, rights are the fundamental normative rules about what is
allowed of people or owed to people, according to some legal system, social convention, or
ethical theory. Similarly, shareholders right include certain powers of control over the
corporation. The corporation must protect shareholder interests, and perform certain legal
duties in order to preserve shareholders’ prerogatives and options. If the rights of the
shareholders are protected, then only concept of shareholder democracy seems to exist. A
shareholder of a company enjoys two kinds of rights they are individual rights and corporate
rights. As an individual a shareholder can enforce his individual rights, here as corporate rights
can be enforced only by a majority of shareholders. The various rights of members of a
company can be grouped under the following heads.”

“(i) Contractual Rights: These are those rights to which a member is entitled by virtue of
Memorandum of Association (MOA) and Articles of Association (AOA). Since the AOA
articles constitute a contract between the company and its member, the provision mentioned in
the AOA is mandatory. Such rights includes- right to have his name on the Register of
members, to vote at the meeting of members, to receive dividends when declared, to exercise
the right of pre-emption, return of capital on winding-up or on reduction of share capital of the
company etc.”
“Since MOA provides the Object Clause of the Company, the member has a right to bring
action to restrain the company from doing an ultra-vires act.”

5
“Life Insurance Cooperation of India V. Escorts Ltd. & others, 1 SCC 264 (1986)”
6
“7 Alan Dignam, Hicks & Goo’s Cases & Materials On Company Law, (Oxford University Press, 2011)”
5
“(ii) Statutory Right: Rights entrusted under the Companies Act, 2013 are known as Statutory
Right. There are various rights provided to a member under the Act are-

(a) Right to have his name entered in the Company’s register of member

Section 88(1)(a) of the Companies Act, 2013 provides that every company shall keep and
maintain a register of members indicating separately for each class of equity and preference
shares held by each member residing in or outside India.
Section 88 (5) provides punishment for default in maintaining such Register. If a company does
not maintain a register of members, the company and every officer of the company who is in
default shall be punishable with fine which shall not be less than Rs. 50,000 but which may
extend to Rs. 3 lakh and where the failure is a continuing one, with a further fine which may
extend to Rs. 1,000 for every day, after the first during which the failure continues.
Thus the liability for such default is increased under the Companies Act, 2013.
Register of members is the prima facie evidence of its contents including membership. It is,
however, not the conclusive proof of membership of a member.”

“(b) Delivery of share certificate”

“Section 56(4) of the Companies Act, 2013,provides that every company shall deliver the
certificates of all securities within a period of 2 months from the date of incorporation in the
case of subscribers to the memorandum; within a period of 2 months from the date of allotment,
in the case of any allotment of any of its shares; and within a period of 1 month from the date
of receipt by the company of the instrument of transfer or intimation of transmission, in the
case of a transfer or transmission of securities.
Section 56(6) provides that in case of default, the company shall be punishable with fine which
shall not be less than Rs. 25,000 but which may extend to Rs. 5 lakh and every officer of the
company who is in default shall be punishable with fine which shall not be less than Rs. 10,000
but which may extend to Rs. 1 lakh.”
“In H.V. Jayaram v. Industrial Credit and Investment Corporation of India Ltd7, where the
share certificates were sent to the purchaser of shares by post as requested by him, the Supreme
Court has ruled that where an offence punishable under Section 113 (2) of the Companies Act,

7
H.V. Jayaram v. Industrial Credit and Investment Corporation of India Ltd, AIR 579 SC 2000.

6
1956 has been committed, the cause of action arises where the head office of the company is
situated and not where the purchaser resides. Therefore, a complaint can be filed only where
the registered office of company is situated.”
“The Court held that since the company had dispatched the share certificates to the purchaser
by post, there was no default on its part as regards compliance of the provisions of Section
113(1) and therefore, there was no merit in appeal and as such the same was dismissed.””

“(c) Right to receive dividend

“Section 127 of the Companies Act, 2013 provides punishment for failure to distribute
dividends. Where a dividend has been declared by a company but has not been paid within 30
days from the date of declaration to any shareholder entitled to the payment of the dividend,
every director of the company shall, if he is knowingly a party to the default, be punishable
with imprisonment which may extend to 2 years and with fine which shall not be less than Rs.
1000 for every day during which such default continues and the company shall be liable to pay
simple interest at the rate of 18% per annum during the period for which such default
continues.”

“IIf a company declares dividend then only it becomes liable to pay.8”

“Thus the Companies Act, 2013 has reduced the limit of the punishment of imprisonment from
3 years to 2 years only and has increased the fine by fixing a minimum amount of Rs. 1000, as
the 1956 Act provided the maximum amount of fine as Rs. 1000.”

“(d) Rights issue (on further issue of shares)

Section 62(1) (a) of the companies Act, 2013 provides that where at any time, a company
having a share capital proposes to increase its subscribed capital by the issue of further shares,
such shares shall be offered to persons who, at the date of the offer, are holders of equity shares
of the company in proportion to the paid-up share capital on those shares.”
“(e) Voting rights
Section 47(1) of the Companies Act, 2013 provides that every member of a company limited
by shares and holding equity share capital therein, shall have a right to vote on every resolution
placed before the company; and his voting right on a poll shall be in proportion to his share in
the paid-up equity share capital of the company.

8
17 A. Ramaiya, Guide to the Companies Act, Part 1, (LexisNexis Butterworths Wadhwa, Nagpur, 2010).

7
A condition is imposed on this right under section 50 which provides that a member of the
company limited by shares shall not be entitled to any voting rights in respect of the amount
paid by him on shares held by him, until that amount has been called up.”

“(f) Right to transfer shares”

“Section 44 of the Companies Act, 2013 provides the nature of shares. It states that the shares
or debentures or other interest of any member in a company shall be movable property
transferable in the manner provided by the articles of the company.”

“(g) Right to inspect register of members or debenture holders, annual returns”

“Section 94(2) of the Companies Act, 2013 provides that the registers and their indices, except
when they are closed under the provisions of this Act, and the copies of all the returns shall be
open for inspection by any member, debenture-holder, other security holder or beneficial
owner, during business hours without payment of any fees and by any other person on payment
of such fees as may be prescribed.”

“”(h) Right to petition for compulsory winding up of the Company”

“Section 272(1) (c) of the Companies Act, 2013 provides that contributory can apply for
winding up on any grounds given under section 271(1). A “contributory” is a person liable to
contribute to the assets of a company in the event of its being wound up. The concept of
contributory arises only at the time of winding up of a company. A member does not become
a contributory until the winding up””

“(i) Right to attend and vote at a meeting of the company and to appoint proxy”

“Section 105(1) of the Companies Act, 2013 provides that any member of a company entitled
to attend and vote at a meeting of the company shall be entitled to appoint another person as a
proxy to attend and vote at the meeting on his behalf.”

8
 “VARIOUS PROVISIONS INCORPORATED FOR THE PROTECTION OF INVESTORS
UNDER THE COMPANIES ACT, 2013 ARE”

“(1) Civil Liability for Mis-statement in Prospectus.

Section 35 of the Companies Act, 2013 provides for the civil liability for misstatement in
prospectus. Where a person has subscribed for securities of a company acting on any statement
included, or the inclusion or omission of any matter, in the prospectus which is misleading and
has sustained any loss or damage as a consequence thereof, the company and the following
persons given below shall be liable to pay compensation to every person who has sustained
such loss or damage.”
Which clearly, protects the interest of all the shareholders, where any shareholder who has been
deceived by way of misstatement in the prospectus should necessarily be compensated.
Therefore, any person who has been wrongfully made to buy the shares of the company by the
misstatements given in the prospectus will be compensated by the director or any such other
member of the company who holds himself responsible for such misstatement.”
In R. v. Lord Kylsant9, a case where a table was published in the newspaper that set froths the
various dividends the company paid during the previous years which were 8 to 10 percent in
the previous three years of the company’s financial years, later on the shareholders who
invested in the company believing in the sound position of the company and the payment of
dividends every year to the tune of 8-10 percent . The reality had an entirely different story to
say, the company was into huge losses and the company has not paid dividend for previous
seven years. The prospectus was certainly held to be false, and the necessary information that
was omitted was condemned.”
“(2) Criminal Liability for Misrepresentation in Prospectus”

“Section 34 of the Companies Act, 2013, provides that where a prospectus contains any
statement which is untrue or misleading in form or context in which it is included or where any
inclusion or omission of any matter is likely to mislead, then every person who authorizes the
issue of such prospectus shall be punishable with imprisonment for a term which shall not be
less than 6 months but which may extend to 10 years and shall also be liable to fine which shall

9
R. v. Lord Kylsant, K.B 442 (1932).

9
not be less than the amount involved in the fraud, but which may extend to three times the
amount involved in the fraud.”

“Therefore, this section is very important in the sense that this section lays down the sanction
on the persons who are liable for preparing the prospectus. This will ensure careful drafting of
the prospectus during the Initial Public Offering and will also, make sure the regulation,
accountability, adequacy and punctuality with respect to the prospectus as well as the company
concerned.”

“(3) Advertisement of prospectus.”

“Section 30 of the Companies Act, 2013 lays down the provision for advertisement of
prospectus. Where an advertisement of any prospectus of a company is published in any
manner, it shall be necessary to specify therein the contents of its memorandum as regards the
objects, the liability of members and the amount of share capital of the company, and the names
of the signatories to the memorandum and the number of shares subscribed for by them, and
its capital structure.”
“This provision lays down essentially the important requirements before advertising the
company in any publications which ensures a proper functioning, the objects, the liability etc.
of the company.”

“(4) Investor Education and Protection Fund”

“Section 125 of the Companies Act, 2013 provides that Investor Education and Protection Fund
(“Fund”) shall be established by the Central Government. That the amount granted by the
central government as funds be used properly. Donation to the funds by various governments
be used for the purpose of the fund. The amount in the Unpaid Dividend Account of companies
transferred to the Fund under sub-section (5) of section 124. Section 124 provides for the
Unpaid Dividend Account. Section 124(1) states that where a dividend has been declared by a
company but has not been paid or claimed within 30 days from the date of the declaration to
any shareholder entitled to the payment of the dividend, the company shall, within 7 days from
the date of expiry of the said period of thirty days, transfer the total amount of dividend which
remains unpaid or unclaimed to a special account to be opened by the company in that behalf
in any scheduled bank to be called the Unpaid Dividend Account.”

10
 “ROLE OF SEBI IN RETAIL INVESTOR PROTECTION”

“This section will briefly describe the role of SEBI towards the retail investors. Now, Prior to
SEBI, the capital issues in the Indian Capital market were regulated and resolved by Capital
Issues (Control) Act, 1947. There were three main objectives of the Act (Control Act, 1947):
The first one is that the SEBI shall make sure that investment in the private sector will follow
according to the objectives of the five year plans made by SEBI. And secondly, the SEBI shall
encourage the improvement and growth of private sector which has got financially strong set
up and thirdly, period wise distribution of capital issues so that there would be no waiting
period for the companies. Principles and policies under the Control Act were regulated by
Controller of Capital Issues (CCI). However, according to the Narasimha Committee
observations, financial market or derivatives market needs a single regulatory authority which
should be able to regulate all the activities in the securities market as there was lot of restrictions
made by CCI. Later on the CCI office was asked to shut down and SEBI was established in
year 1992.”

“SEBI is the apex body of the Indian stock market. It regulates controls and promoting of the
Indian stock markets. Under the provisions of SEBI Act 1992, it was established on 12th April
1992. Its head Office in Mumbai and it was one of the best reforms happened in the history of
the Indian economy. With the growth in the dealings of stock markets, lot of malpractices also
started in stock markets such as price rigging, ‘unofficial premium on new issue, and delay in
delivery of shares etc. Because of these malpractices, customers started losing confidence and
faith in the stock exchange. So government of India decided to set up an agency or regulatory
body. This is body or agency now known as SEBI.”

11
 WORKING FOR THE FAIR TREATMENT OF RETAIL INVESTMENT10

“Protection of investors means safeguard and enforcement of the rights and claims of a person
in his role as an investor. The capital of a company may be divided into Equity capital and
Debt capital11. The persons who contribute to the equity capital of a company are called
investors. Investors have the voting rights in every matter of the company and are entitled to
get dividend. It is different from the creditors who contribute to the debt capital of the company,
who in turn get fixed rate of interest on the money so lent. Moreover, creditors have limited
voting rights only with respect to those matters which directly affect their interest such as
reduction of capital, winding up of company etc.”
“Investors are the insiders of the company. They are known as shareholders or members of the
company. It is to be noted that all members may not be shareholders, but all shareholders are
the members of the company. Section 41 of the Companies Act, 1956 provides that “member”
includes the subscribers of the memorandum of a company, every other person who agrees in
writing to become a member of a company and whose name is entered in its register of
members, and every person holding equity share capital of company and whose name is entered
as beneficial owner in the records of the depository. Section 2(55) of the Companies Act,
2013 provides for the definition of “member” which is same as that given under S. 41 of the
Companies Act, 1956. Accepting these realities, then, it is incumbent that (1) the securities
arbitration process is a fair process and is perceived as such, and (2) regulators are vigilant in
promulgating investor protection measures and enforcing them aggressively12”

TO BRING ABOUT A CONDUCTIVE POLICY ENVIRONMENT

“It is very basic to build up an arrangement structure which ought to distinguish and amend
any obstacles to retail speculator section and interest, considering the need of such financial
specialists to put resources into little parcels and their shortcoming in respect to institutional
and high total assets people when trying to secure offers. Since shared store establishments are

10
Barbara Black, Working toward Fair Treatment for Retail Investors, 76 U. Cin. L. Rev. 375 (2008)
11
Wulf A. Kaal; Bentley J. Anderson, Unconstrained Mutual Funds and Retail Investor Protection, 36 Rev.
Banking & Fin. L. 817 (2017
12
Ibid.

12
imperative methods for market commitment for retail financial specialists, they should be
urged to create fitting, straightforward items that serve the benefit building objectives of littler
speculator and construct wide dispersion systems for them. The dissemination of shared store
items through a wide system of bank branches spread the nation over ought to be advanced in
the coming occasions. Proceeding, with a specific end goal to protect the enthusiasm of
financial specialists especially retail speculators, stringent exposure of data by backers must be
requested, improvement in straightforwardness of data, setting strategy system for delegates
for giving quality budgetary exhortation to offering venture items, advancing financial
specialist training, monetary education and accessibility of reasonable and open question goals
systems for financial specialists who feel wronged by the venture procedure. Enhancing the
simplicity and decreasing the expense of section for retail financial specialists and movement
in value markets with the assistance of motivations by the Government would going to upgrade
retail speculator's interest in value advertise, proceeding. 13

Professor Bullard explores the possible impact of Dura Pharmaceuticals, Inc. v. Broudo14and
its interpretation of loss causation on claims asserted by mutual fund investors. He warns that
Dura could foreclose all private claims against mutual funds, if applied consistently with loss
causation involving operating companies. Courts would have to treat "value" and "loss"
differently in the mutual fund context to permit claims based on misleading information about
their services and sales practices.

THE RETAIL INVESTOR AND THE FIDUCIARY STANDARD

The imposition of fiduciary duty onto the broker or the salesman will create barrier to the
availabity of investment advice to the small investor15. On the other hand, if the investor can
afford an investment advisor, that relationship will be governed by the fiduciary standard of
care and the costs associated with it. On the off chance that the financial specialist can just
manage the cost of exchange by-exchange proposals, that alternative ought not be killed. of
directions that would result in less venture alternatives for the little financial specialist, the

13
Davis, Alicia J., A Requiem for the Retail Investors?, Va.L.Rev.95, no.4(2009): 1105-29.
14
Dura Pharmaceuticals, Inc. v. Broudo 544 U.S. 336 (2005).
15
Paul R. Walsh; David W. Johns, Can the Retail Investor Survive the Fiduciary Standard, 87 St. John's L.
Rev.437 (2013)

13
focal point of controllers ought to be on illuminating also, instructing general society, and
forcefully seeking after representatives and venture guides who damage existing guidelines and
commitments. Simultaneously, financial specialists are urged to take a more grounded
enthusiasm for the capabilities, notorieties and achievement of the people they look to make
up for venture suggestions. Representatives are a piece of an exchange based remuneration
framework where the item is focal and their counsel is accidental. The reverse is found in the
venture guide customer relationship; the item is coincidental to the exhortation. In that lies the
problem. a fiduciary standard, which would require disinterested investment advice, be
reconciled with a compensation structure linked to the product? It would not be reconciled; the
average investor will lose access to transactional investment brokers, and access to professional
investment advice would be limited to the wealthy

MEASURES FOR IMPROVING THE ENVIRONMENT AND THE INVESTORS16

To begin with, it ought to recognize and rectify any obstructions to retail financial specialist
passage and support, considering the need of such speculators to put resources into little parts
and their shortcoming in respect to institutional and high total assets people when trying to
secure offers.17
- First, it ought to reinforce direction went for guarding against market control and value fixing
since misfortunes maintained by retail financial specialists because of such action influences
them to pull back from business sectors and remain out.
- Second, they have to guarantee that data revelation by guarantors of value and recorded
organizations is thorough and clear to permit retail investors to touch base at educated
judgments on venture choices.
- Third, it is important to teach investors not just on the potential investment funds openings in
the market, yet in addition on a proof based, sensible speculation procedure.
- And, at last, it is important to reinforce the shared store circulation organize keeping in mind
the end goal to pull in retail financial specialists to the Indian Capital Markets.”

16
Wulf A. Kaal; Bentley J. Anderson, Unconstrained Mutual Funds and Retail Investor Protection, 36 Rev.
Banking & Fin. L. 817 (2017)
17
Black, Barbara, How to Improve Retail Investor Protection after the Dodd-Frank Wall Street reform and
Consumer Protection Act (2010)

14
 CONCLUSION

“This article first gave an introduction to the topic retail investors, their status quo in India, and
how Indian law protects the retail investor, the role of SEBI in protecting the retail investors
and education programs which are currently available in the country. Programs like; regional
seminars, dedicated website for the investors, education material, financial programs and even
programs from school children have been developed. The researchers in this article observed
that the retail investors position is dynamic in India with respect to the change in the policy
making and the retail investors need more education on the investment strategies. It is clearly
evident that the interest of the retail investor stays speculative in India’s market and falls short
of the potential investors despite of government’s encouragement and the aid from financial
institutions. It is very pertinent to note that in this era where everybody is earning their own
bread their own ways, the retail investors are the ones who have are the potential investors in
the start-ups, the companies and so on so forth. Therefore, the law has to be secure in order to
attract such potential investors to invest and bring capital in the company.”

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