There are provisions to safeguard the interest of investors in stocks, including suspension of erring companies, but there is no mechanism for compensating them as the exchange is a private entity and trading involves risk, Finance Minister P Chidambaram said today.
1,125 companies were suspended from trading between April 2009 to February 2013 mainly due to non-compliance with the listing agreement and also due to non-payment of listing fees, he told the Lok Sabha during Question Hour.
Asked how the loss incurred by an investor who puts his money in a company that was later delisted can be recovered, he said, “The suspension comes into effect after 21 days. The shareholder can exit in this time period.”
He accepted that in case of suspension of a company the shareholder would be affected but the government cannot do anything if the investment was made in a company that failed to comply with the rules.
“Stock exchange is a market place, it is a private entity.
“SEBI is the regulator. In a market place, there will be some who will not comply. There is no mechanism by which the government can compensate the shareholder. The market is based on speculation and risk,” Chidambaram said.
He, however, insisted that share-holding is a legitimate business and only those who break laws are acted against.
“An investor may not be able to buy or sell the shares through that Stock exchange where the scrip is suspended.
However, the investor will be able to encash the value of shares whose trading is suspended if they are able to find a willing buyer for the shares, outside the exchange platform,” he said.