Investors' new e-friend

Are you one of those millions of investors who lost their life’s savings in the stock market or through company deposits or plantation schemes (there was one big scam a year in the last decade) due to unscrupulous promoters vanishing with funds, often reappearing with a new scheme or a new company? Well, help is on its way, to save you from future losses at least.

A first-of-its-kind website, and free at that, www.watchoutinvestors.com is going to be launched in the next few weeks, and will help investors keep track of all actions taken against companies and intermediaries and their directors/promoters by any regulatory body since January 1, 2000 (older data will be covered gradually)—the site already covers eight such regulators including the ministry of company affairs, Sebi, the RBI, and NSE.

Eventually, it will cover over 30 including the tax authorities, banks, debt recovery tribunals, among others. To conduct a similar search today, you would need to go to each regulator’s site, each of which has different formats and no tailor-made search facilities either, making a meaningful search next to impossible.

So, if as an investor you’re planning to invest in a company just promoted by yours truly, all you’ve got to do is to execute a search on my name and it’ll give you details of any action against me (like Sebi sentencing me for insider trading), even in other companies of which I’ve been a director/promoter—I checked, there’s no regulatory action against any Sunil Jain!

Alternatively, you can simply type in the firm’s name for such details. The name will show up with all charges/actions in a simple tabular format. All associate entities would also be shown.

So if you are looking for the misdemeanours of Ketan Parekh and the regulatory action taken against him and his entities, just enter his name—the site will show that he has been debarred from the capital market till December 11, 2017. Just click on the action and the full text of the order (from Sebi, the RBI, whoever) will be displayed.

For those who don’t want to check the site everyday, there’s a facility called mywatchout that allows you to just file names of companies in your portfolio, and you will get a weekly update on any regulatory action against these companies, to let you take a timely decision.

This site is also good news for the media, lawyers, students, and researchers and, of course, the regulators themselves.

It has taken Prithvi Haldea of Prime Database, the country’s only database on the primary market, almost two years of painstaking effort to set up this website.

After a series of scams in the 90s, Haldea tried to create a financial rogues’ gallery but was frustrated since no regulator put such data out in the public domain. Good news came a few years ago.

The RBI put out a defaulters’ list in 2001, Sebi began posting its orders on its website in 2002, the MCA too started putting out information, so did many other regulators.

Haldea got going, but soon found no regulatory body had a usable database, even on its own actions (which may incidentally allow firms/individuals to resurface from time to time even after being indicted).

While the RBI has a list of NBFCs in a plain Word file, Sebi has text files of its chairman’s orders on its website, and data from the registrar of companies (RoC) are in only a typed format.

Haldea’s team downloaded thousands of complete files, read full texts, marked relevant information and then entered this into the database!

Needless to say, no regulatory body has ever bothered to combine the regulatory actions of other regulators—there is no list of companies or individuals against whom, say, both Sebi and the RBI have taken some action.

So, for example, while Sebi’s website shows that Pravin K Tayal has been debarred from accessing the capital market till June 2005, the RBI still allowed Tayal to become the chairman of the Bank of Rajasthan!

While combining the databases sounds simple, this was the biggest killer and is really the most serious regulatory lapse. Apart from the fact that databases of various regulators differ in their structures and are incompatible in their current form, they’re often riddled with serious mistakes, including spelling errors.

As example, while the broking registration of Praman Capital Market Services Limited was cancelled, the regulatory order typed the first word as Pranam—naturally then, no action would show up against Praman’s name.

Haldea, however, checked this name against his database of over 35,000 entities, figured there was no such name, then verified the name with the stock exchange’s database. All told, 40 such checks are done before a name gets listed among the 27,792 firms and 3,289 individuals that are currently on the website (and growing by the day).

For such work to be truly useful, however, a series of regulatory gaps still needs to be plugged. For example, there are several SAT (the appellate tribunal for Sebi) orders for which the corresponding Sebi order is not available on Sebi’s site.

As a result, entities which have been indicted in these Sebi orders do not get shown on Haldea’s website. Moreover, clicks on several Sebi’s press releases do not lead to a chairman’s order and vice versa.

Like all databases, this one too will keep evolving, and its lists will become a lot more comprehensive with each passing day. The site is a major step forward in cleaning up the country’s markets, and for that, Haldea’s team deserves our gratitude. As does the ministry of company affairs, which has sponsored the effort.