Monday, May 15, 2006

Royalty Free Idea of the Month # 2

The Concept
A viable and transparent way to fund political parties.

The Need Gap
Funding is a huge problem for most political parties in India. Membership fee from party workers is simply inadequate to take care of the expenses. Slush money from sleazy sources and mystery suitcases from mercenary businessmen keep the parties afloat. Fund crunch forces our netas to resort to corruption. Fundex aims to plug this financial and moral void.

The Solution
Fundex or Fund Exchange will be a stock exchange specially created to mobilize public money for political parties.

What will Fundex trade in?
Fundex will trade in political stocks with no voting powers.

Who can get listed in Fundex?
Any political party recognized by the Election Commission of India.

Who will be the investors?
Mutual funds, banks, corporations, financial institutions, insurance companies, party workers and retail investors based in India.

Who will run Fundex?
The Election Commission of India will monitor Fundex with able assistance from SEBI. A special institution can be created by the parliament to run Fundex on a day to day basis.

How will Fundex work?
Any political party that wishes to raise capital will have to first declare:
a) The amount of capital required.
b) Why the money is needed.
c) What the party wishes to do with the money.
d) The financial health of the party.
e) The assets and liability base of the board of governors of the party.
f) The non-financial benefits of investing in the party.

Once this red herring prospectus has been cleared by the Election Commission, the political party will go in for an IPO. The number of Non Voting Shares (NVS) on offer and the denomination of each NVS will be announced. The listing procedures will be very similar to that of the National Stock Exchange.

Once the IPO has been successful, the NVS can be electronically traded in Fundex. Investors can buy & sell the political stocks either directly or through brokers authenticated by SEBI.

Since the investor is entitled to no voting rights and financial dividends, the only source of revenue for the investor is going to be through stock trading.

So Fundex will in essence be a trading exchange for political stocks of all hues.

The stocks will move up or down depending upon the performance of the party through out the year.

What’s in it for the political parties?
1. Potentially unlimited source of funds through out the year.
2. Full time party workers can actually be paid salaries with this money.
3. Party members can be allotted PSOPS (Party Stock Options).
4. Dependence on slush funds decreases.
5. No need to humour businessmen who help the party.
6. The financial brokers who control the party will now lose their sheen. The true blue organization men and mass leaders will have control over the party.
7. The small party needn’t fear the money power of the big party.

What’s in it for the investor?
1. An active stake in the political future of India.
2. Monetary gain by trading in political stocks.
3. A chance to fund the parties you like.
4. Income tax / corporate tax deductions.
5. No harassment from party goons for funds.

What’s in it for the general public?
1. A Lok Paritran has as much a chance of mobilizing funds as the Congress (I).
2. More transparency in politics. As in, parties will have to issue annual reports stating their achievements & financial transactions for the year.
3. An opportunity to make political parties more accountable. What I mean is, earlier parties used to listen to voters once in 5 years; now they’ll have to do it almost everyday. Otherwise the party stock will take a plunge in the Fundex.
4. Lesser corruption.

What are the checks & balances to make Fundex work?
1. An external audit of the statement of accounts of political parties by auditors who report to the Election Commission.
2. A daily circuit breaker to control excessive speculation on political stocks.
3. A hawk eye on the kind of investors pumping money into the political parties.
4. The National Vigilance Commission should be given powers to probe any complaints on misappropriation of funds.

2 Comments:

Blogger sanchapanzo said...

Super idea

5:56 AM  
Blogger obiewan said...

SUPE idea - Is the Election Commission listening?

7:07 PM  

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