markets
Regulation Follows The Scam
The rule
Rules that protect investors are usually written only after a big blow-up has already ruined people.
Where it flips
Taken too far, this breeds blanket distrust, where every regulated product feels like a trap, and you avoid even plain index funds and bank deposits. The fix: treat regulation as a floor, not a ceiling. Use it, check the exact product, and save your suspicion for anything promising returns the rules have not yet caught up with.
Almost every safeguard on Dalal Street exists because someone was cheated first. SEBI tightened disclosure rules, banned some products, and forced margin rules only after scams showed the gap. So a regulator being quiet about a scheme does not mean the scheme is safe. It may just mean nobody has been burned badly enough yet. Assume the rulebook is one crisis behind the market, and protect yourself, rather than trusting that 'they would never allow this'.
A worked example
Rohan puts ₹4 lakh into a fixed-return 'assured 24%' scheme, thinking that if it were illegal the authorities would have shut it. A year later the scheme collapses, and only afterwards is a rule made to ban such promises. [illustrative]
How to spot it
- ·'The regulator hasn't banned it, so it's fine'
- ·New product with no clear rulebook yet
- ·Assured high returns with official-sounding cover
Santosh Nair · Bulls, Bears and Other Beasts