India’s Securities and Exchange Board of India (Sebi) will offer financial help, as “investor education and related activities,” to select investor rights groups fighting court battles against listed companies and market intermediaries such as brokerages. “Funding will be considered on a case-to-case basis,” said a senior Sebi official, who did not want to be identified. Sebi will pick up to 75% of legal fees in these cases.
Legal cases fought by investor associations will qualify for Sebi funding only if there are a thousand or more investors affected, or likely to be affected, by issues such as mis-statement in offer document, non-payment of dividend, fraudulent and unfair trade practices or market manipulation. Legal aid will not be provided if the Sebi board is a party in the court case or where it has initiated enforcement action.
IIM-A’s Varma, who is also a former Sebi board member, said a more effective step would be if India introduces class action law suits. “It is easy for a large firm to buy out a small association of retail investors.” (Sebi to finance, nurture activist investor clubs, LiveMint.com, 2/20/09)
Yes, we have class action lawsuits in the US, as well as several activist institutional investors, such as Florida SBA, CalPERS and CalSTRS. However, most of the associations focused on retail investors seem to be geared toward brokers and other providers of service and stock picking but nothing on responsible ownership and proxy analysis. The closest we see to have are the Investor Suffrage Movement and Proxy Democracy. I’d love to see SEC funding for organizations like them and for promoting corporate governance activism. Under e-proxy, 95% of retail shareowners aren’t voting. Obviously, something is wrong. Maybe the Sebi is onto something.