Investment Securities essentially means investment in securities generally traded in the stock markets across the globe. A “security” generally means any note, stock, treasury stock, bond, debenture or any certificate of interest or participation in a profit-sharing agreement. Securities may be certificated or un-certificated. Certificated security may mean an intangible interest, the instrument representing that interest or both, un-certificated security is not represented by an instrument and its transfer is registered upon books maintained for that purpose by the issuer. A “security” entails a warrant or right to subscribe to, or purchase any of the foregoing. It should be noted that a security will not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money in a lump sum manner or in any other specified way.
According to the Uniform Commercial Code in the American structure, an investment security is assisted with the terms such as “issuer,” “transfer” and “registration.” An issuer authorizes the issuing of the security in the capacity of an authenticating trustee, registrar or a transfer agent to certify the participation of interest in his property or of an enterprise. The purchaser of the security acquires the rights of transfer of the security passed on to him by the transferor only to the extent of the interest transferred. Lastly, it is the duty of the issuer to register transfer, pledge or release of the security. The Securities and Investment Institute (SII) is the leading professional organization for securities practitioners around the globe.
Evolving business needs and new technologies are forcing many of the investment and securities services firms to use Information Technology (IT) techniques to increase speed and accuracy in a real-time environment and find cost effective ways to streamline operations. Companies such as Kanbay, a unique service provider to the securities and investment industry provides assistance to firms in ways such as asset management and fund accounting accommodating the risk factors, prime brokerage and hedge funds and proprietary trading and investment banking. The number of financial services offered by the investment and securities firms is also rising to cater to the needs of the wealthy and investment-savvy public.
Investment in securities can be a risky proposition for many as the prices of securities are very fluctuating in nature. In the context of India, major financial market changes have occurred in India since the post 1991 liberalization period. This was primarily driven by a large number of private players entering the banking and financial services sector in the commercial banking and asset management business. Adding to it, the many deregulations implemented by the government and the openings in the insurance sector with stiff competition among the private players have ensured that interest rates have not increased too much in that period.
The capital market regulators, namely the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Management Authority (IRDA) have been given more independence by the Union Government. Besides, the Public Sector Banks, due to its sheer reach to the rural areas of the country and still managing the majority of business in the banking industry are being encouraged to run on professional lines and many have already been listed on national stock exchanges. Notable in this context is that the watchdog of the American stock market industry is the Securities and Exchange Commission (SEC). Continuing with the USA, the Bureau of Labor Statistics (BLS) has observed that the securities, commodities and other services industry have recorded consistent growth rates after 2004.
Some policy changes regarding investment in securities announced by the government of India include that the Non-Resident Indians (NRI’s) are free to invest their funds in government securities as also in units of the Unit Trust of India (UTI) which can be purchased through authorized dealers or directly from the UTI. They are also allowed to invest their funds in the National Savings Certificates subject of certain conditions. If securities such as government securities and units of UTI were purchased out of funds remitted from abroad, the sale or maturity proceeds have also been allowed to be repatriated. Regarding company shares or debentures, NRI’s are permitted to invest in proprietary or partnership concerns in India and also in shares/ debentures of Indian companies on both repatriation and non-repatriation basis. The concerned companies have to make declarations with the Reserve Bank of India (RBI) within ninety days of the investment. Under the existing Industrial Policy allowing 51% foreign equity holdings on a repatriation basis, the remaining 49% equity can be taken up by the NRI’s on a repatriation basis. NRI investment in schemes of domestic Mutual Funds or Public Sector bonds with repatriation benefits can be undertaken with the concerned mutual fund or Public Sector Company obtaining permission from the RBI. Under the portfolio investment scheme, NRI’s are allowed to acquire shares/debentures of Indian companies or units of UTI’s through the Stock Exchanges of India.