The proposal often comes from someone you know and trust.

It promises ethical earnings, local jobs, better schools or development in your own community. The intentions may be genuine, but SEBI takes a different view: good intentions alone do not make an investment safe.

The regulator cautions against guaranteed returns, pressure to pay at once, misleading testimonials and thin paperwork. It says friendship, religious sentiment or fear of missing out should never replace independent examination.

The first question is what the buyer is actually holding. 

Equity shares, preference shares and debentures behave differently. In a fresh issue the company receives the subscription money, but when an existing shareholder sells, the payment generally goes to that seller and none of it funds the expansion the promoter describes. 

The buyer should check the rights attached to the security, the seller’s ownership, the approvals needed and how the purchase will be recorded.

Public records exist for exactly this purpose. 

The Ministry of Corporate Affairs runs online services where company filings can be inspected, subject to procedures and fees, while the Registrar of Companies registers firms, maintains their records and oversees compliance within its jurisdiction. 

An investor can pull the legal name and Corporate Identification Number, the company’s status and registered office, its directors and authorised signatories, annual filings, financial statements, annual returns, charges registered over assets, constitutional documents and transaction filings. 

A company secretary can read them for missing or overdue entries. The records let a buyer set the promoter’s claims beside the paperwork. They stop short of vouching for returns, because........

© Kashmir Observer