This is a very broad question and the answer is not easy to give. First of all let us clear some myths about what the retail investor thinks a regulator should do and what the regulator actually does.

1. The regulator is here to protect the small investor: Very very very broadly yes, in real life situation no. Let us take an example – assuming that Siemens is the company making all the signalling systems in the world. Fairly obviously installation of signals reduces accidents, correct? However if there is a drunk truck driver who loses control and hits you on the other side of the road (on the footpath) and you are almost fatally wounded, who will you blame?

Similarly the financial regulator makes rules which about 5% of the end users make an attempt to understand. Maybe 10% of the people who make an attempt actually understand – this means about 0.5% of the user base understands. Too low, eh?

2. For developing the industry: Again broadly yes. In 30 years have not seen this happen, so will give this a pass.

3. For creating good and balanced regulations: This is again difficult, if you speak only to the manufacturers. SEBI speaks to say AMFI for making mutual fund rules and regulations. What happens? they are speaking ONLY to the manufacturers (asset gatherers and managers) – and leaves out the registrar, custodian, banker, broker, distributor, advisers, …etc. literally the whole support system of the mutual fund industry!

4. They make rules to help the investor: Hmmm if the regulator’s office recruits from the industry, talks to the same people who have to be regulated, there is likely to be some incest, right? Well, absolutely true. Take the condition that the same fund manager who does the accumulation should be the same person who does the annuity pricing and distribution. Does this sound good for the annuity seeker? No. It actually takes away flexibility for the client and he will be stuck with a poor fund manager. If you have started a pension plan (investing) when you are 24, you are stuck to the same company for the next 60 years. Amusing.

5. Spreading Investor awareness: sadly nobody except the investor NOBODY is really interested in investor awareness. However the investor does not even know what he/she is missing. So as a CSR (Corporate Social Responsibility activity) regulators expect players in the business – brokers, mutual funds, life insurance companies, banks to do this activity. This will NEVER happen – this is like asking the MD of an automobile company to do classes on road safety. Will he talk about the brake failures, etc.? I doubt it. Your call.


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  1. A regulator is a lazy person’s God and protector.and like all gods,this one too will disappoint.
    a blog like subra’s or sucheta dalal does more for regulation than any number of Bhaves or damodarans.
    an aware investor is the only regulation that matters.the rest of it is pure jazz and self deception

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