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Stemming the scams

R. Desikan

We have seen several crashes in the share market. They have all been attributed to the carelessness of the regulator, or the greed of the bull. Though one cam find several reasons that helped set off these scams, one thing is certain -- none of the money that has been lost will come back into the system. A few people in the middle level management are sacked, an enquiry is instituted, and finally after a few months everybody forgets and the share buyers go back into speculation with renewed vigour.

Why does this happen ever so often? Most of us are greedy and are looking for an opportunity to make some money as quickly as possible. As the greed increases, confidence is injected into the mind. A few successes with a gain of a few thousand rupees giv es additional strength. When a few thousands of rupees are lost, the greedy want to make up for the loss by investing more in the bourses. So, the chase to make a quick gain continues.

I do not care about all those who have the money and resources to gain or lose. But unfortunately it is this small group that plays havoc. The excitement they generate by manipulating the stock market attracts the attention of several innocent investors who think that they are following the experts in the share market. But they rarely realise that they are pawns in a game. The money these small investors invest in the market is their savings which they can ill afford to lose.

The media has done well to do a detailed post-mortem of the scams and any investor would do well be educated by these reports. But this has not been the case. Small investors continue to be drawn by the market.

The regulator is meant to protect the unwary and innocent. Failure of the SEBI as a regulator three times in quick succession is not acceptable. Something has to be done and the Finance Minister has to take action in this regard.

It is high time that consumers are involved in the decision-making process at the stock exchange. I do not mean shareholders alone. They must bring in people who have never played the market but who nevertheless exhibit a strong streak of commom sense. I would even go a step further to suggest that even the few consumer activists who are serving the committees in the regulatory authorities must be replaced with those who can do a better job.

Uppermost on the priority list would be to list out all reasons that brought about the last three scams. These points, which could be summarised in short sentences for easy access, must be discussed thoroughly and a decision as to how to avoid repeat per formances must be arrived at. These solutions must be conveyed to the Finance Minister post-haste and the Ministry should taken action within a time span of 90 days. And at the helm of all these discussions should be a forum which comprises of people who are familiar with the workings of the exchange as well as those who only have a cursory knowledge of the goings on. The latter have been suggested because it is a well-known fact that a rank outsider, most often, is able to get to the crux of the proble m with little effort.

Why do shares shoot up in value and why do they crash so quickly? I believe it is because of manipulation by `knowledgeable' people who have an interest to use the market to enrich themselves or by those few who are regarded as `super bulls' in the share market. Both play important roles. The power to call up a bank and ask the chairman or GM to credit one's account with a few crore rupees is as intoxicating as taking alcohol or drugs to reach a state of `high'. Power corrupts and absolute power corrupt s absolutely -- and this is the guiding principle which backs most of the manipulators.

A permanent solution can be found only if we cam implement a `zero failure' system. The nuclear bomb cannot be activated unless a series of actions are taken by different people in a sequence. Similarly, we must have ways and means to protect the ordinar y share buyer whose sole aim is to is make a little money. His greed should not be encouraged in any manner.

Instead of appointing committees of officials and retired bureaucrats, the Government must bring together intelligent, non-political persons of some reputation who have exhibited a strong sense of responsibility towards the public to review the situation .

Let us not forget in our hurry to make quick money in the share market, that shares were originally meant to collect small amounts of money from a large number of people to fund an enterprise which the entrepreneur finds difficult to keep afloat because of his limited individual resources. But today it is nothing but speculation and this must change, for anything that comes into the arena of speculation will fail often and in the process reduce to nought the fortunes of a large number of people.

The author is former chairman, Federation of Consumer Organisations, Tamil Nadu. He can be reached at rdesikan@vsnl.com