Sapna Dogra Singh / New Delhi May 02, 2009, 00:42 IST
The Investor Education Protection Fund (IEPF), which was incorporated about seven years ago to protect the interests of investors, is languishing as there are hardly any proposals before the government on which the money from the fund can be spent.
“Not much has been spent under the IEPF in the past years, as there are no good proposals coming,” said a senior official of the Ministry of Corporate Affairs (MCA).
IEPF, set up in 2001 under Section 205C of the Companies Act, accounts for unclaimed funds from dividends, matured deposits, matured debentures or share application money, which are transferred to the government by companies if they are not claimed for seven years.
Besides creating awareness among investors about the various investment options and the risks involved, IEPF is also meant to protect them from fly-by-night operators in the market.
According to the MCA official, the corpus of the IEPF fund is around Rs 500 crore, but not much has been incurred. Sample this: for the three-year period from 2005 to 2008, of the Rs 89.51 crore collected under IEPF from companies, only Rs 8 crore were spent.
The IEPF rules also talk about funding of non-government organisations (NGOs) to fight class action suits along with other issues, but there seem no takers for this, too.
“The ministry is keen to spend the money, but it didn’t get adequate proposals,” the MCA official said.
Incidentally, the fund is not with the MCA but lies with the finance ministry in the Consolidated Fund of India (CFI) and the MCA gets a limited amount every year to spend on various activities to protect investors’ interests.
According to another MCA official, the money is mainly spent on publicity programmes.
“IEPF is wrongly credited to CFI. Parliament has said that the fund should be utilised under the Companies Act by the MCA,” said the official, adding it should not be part of the general budget because it is made of investors’ money. The ministry’s repeated attempts have failed to get this fund. Last year, the law ministry also favoured the fund to stay with CFI.
The market regulator, Securities and Exchange Board of India (Sebi), had also set up an investor education and protection fund in 2007 with an initial amount of Rs 10 crore. The fund gets contributions from the SEBI Board, grants and donations by the Centre and state governments, and interest or other income received out of the investments made from the fund.
The fund can be utilised to compensate the holders of shares, debentures and fixed deposits of vanished companies (not wound up, or being wound up), based upon a proper claim, the procedure for which may be formulated by the Ministry Of Company Affairs, in consultation with SEBI.
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