Bourses must check companies' credentials before listing
OUR BUREAU
PUNE, Jan 17: It should be mandatory for all the stock exchanges in the country to examine a company's credentials before it is listed, Investors Grievances Forum (IGF) president Kirit Somaiya said. The failure of regulatory authorities notwithstanding, the stock exchanges should be held equally accountable for investors' loss of faith in capital markets, he said.Speaking at the inaugural session of the two-day Investfest '98, Somaiya suggested that reinstating a suitable pricing authority (similar to the controller of capital issues) was necessary to restore investor confidence. Somaiya said that the regulatory authorities should have initiated stringent action against errant NBFCs much earlier. He also urged the investors to exercise caution before investing in "attractive" schemes on offer, especially in time share resorts, NBFCs and plantation companies.BSE executive director RC Mathur stressed the need to educate the small investor about his rights and obligations. He said, "The shareholder bodyshould rise collectively against a recalcitrant management. A well-informed shareholder is the only guarantee against unsafe investment offers." The participants recognised the increasing role of credit rating as a crucial indicator for taking investment decisions. CARE's chief economist Mohan Nagarajan said that there was an urgent need to communicate the implication of various ratings. He regretted that in the recent past, gullible investors had been misled by finance companies which had taken advantage of the investor's ignorance in this regard.He also emphasised that in case of more than one rating obtained for a particular instrument, companies should be made to clearly publicise each of the ratings. "The present practice, whereby the company publicises only the most conservative rating, goes against investors' interests," he added. Natarajan, however, warned that credit rating was only a "forward looking picture based on the company's track record" and the investor should base investment
decisions only after making his own "due diligence" study.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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