For financial intermediaries, NISM(and NCFM) have successfully scaled up curriculum and tests to ensure a basic level of knowledge, commensurate with the risks/products sold. But for investors who often commit a good chunk of their savings to the market, there is no such mandatory testing. One may argue that interested investors will learn from newspapers/financial press/magazines/internet etc, but they may be mislead by the wrong sources, also it may be 'too little too late'. While financial literacy is spreading via CBSE curriculum/RBI comics/investor talks/NSE tieups with colleges etc, one needs to deliver a big-bang training, to ensure that people know-and more importantly acknowledge-the various details/risks of their decision to do active investing.
Such a test could be made compulsory for those with broking accounts, private wealth management coverage etc, and then rolled out to all. Exemptions are not desirable-because often even commerce graduates may not have the right concepts. The format could be a MCQ test with caselets, in multiple languages(Hindi/English/State language), with the expense borne by the investor protection fund of the stock exchanges. It could cover the basic NCFM modules content + awareness of frauds/dangers in common investor actions like day trading, margin trading, blank POAs etc. The benefits of this are
- Lesser chance of 'noise traders'
- Brokers will be happy as arbitrations become easier('investors cannot claim ignorance')
- Financial planners prospective client base will go up
- Basic financial products(index funds, pension funds, term insurance) become more popular.
- General financial education level improves.