Securities and Exchange Board of India (Investor Protection and Education Fund) Regulations, 2009 by way of Notification No. LAD-NRO/GN/2009-10/05/163525 dated 19th May 2009 with immediate effect.
Yes, SEBI calls IEPF (under MCA) as IPEF by this regulation which has 14 regulations, divided into V Chapter with a Schedule for the purpose of listed companies. Understand the said regulation now.
Reg 2(1)(e) ->‘Fund’ means the Investor Protection and Education Fund (IPEF) created by SEBI u/s. 11 (functions) of the SEBI Act.
As per Regulation 3, the Fund shall be deemed to have been established on 23rd day of July, 2007, by the order made by the Board under section 11 of SEBI Act.
Reg 2(1)(g) ->‘Legal proceedings’ MEANS any proceedings before a court or tribunal where 1000 (one thousand) or more investors are affected or likely to be affected by:-
(i) mis-statement, misrepresentation or omission in connection with the issue, sale or purchase of securities;
(ii) non-receipt of securities allotted or refund of application monies paid by them;
(iii) non-payment of dividend;
(iv) default in redemption of securities or in payment of interest in terms of the offer document;
(v) fraudulent and unfair trade practices or market manipulation;
(vi) such other market misconduct which in the opinion of the Board may be deemed appropriate;
BUT DOES NOT INCLUDE any proceeding where the Board is a party or where SEBI has initiated any enforcement action.
Reg 4 - The following amounts shall be credited to the Fund:-
(a) contribution as may be made by SEBI to the Fund;
(b) grants and donations given to the Fund by the Central Government, State Government or any other entity approved by the for this purpose;
(c) proceeds in accordance with the sub-clause (ii) of clause(e) of sub-regulation (12) and the sub- regulation (13)of regulation 28 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers-sast) Regulations, 1997;
(d) security deposits, if any, held by stock exchanges in respect of public issues and rights issues, in the event of de-recognition of such stock exchanges;
(e) amounts in the Investor Protection Fund and Investor Services Fund of a stock exchange, in the event of de-recognition of such stock exchange;
(f) interest or other income received out of any investments made from the Fund;
(g) such other amount as SEBI may specify in the interest of investors.
Reg 5 (1) The Fund shall be utilised for the purpose of protection of investors and promotion of investor education and awareness in accordance with these regulations.
(2) Without prejudice to the generality of the object in sub-regulation (1), the Fund may be used for the following purposes, namely:-
(a) educational activities including seminars, training, research and publications, aimed at investors;
(b) awareness programmes including through media - print, electronic, aimed at investors;
(c) funding investor education and awareness activities of Investors’ Associations recognized by SEBI;
(d) aiding investors’ associations recognized by the Board to undertake legal proceedings in the interest of investors in securities that are listed or proposed to be listed;
(e) refund of the security deposits which are held by stock exchanges and transferred to the Fund consequent on derecognition of the stock exchange as mentioned in Regulation 4(d) in case the concerned companies apply to SEBI and fulfill the conditions for release of the deposit subject to Regulation 6.
(f) expenses on travel of members of the Committee, who are not officials of SEBI, and special invitees to the meetings of the Committee, in connection with the work of the Committee;
(g) salary, allowances and other expenses of office of Ombudsman; and
(h) such other purposes as may be specified by the Board.
Reg 6 - The aid to investors’ associations, as referred to in clause (d) of sub-regulation (2) of Regulation 5, shall be given by SEBI in accordance with the guidelines made by it and subject to the following conditions:-
(a) that the aid shall not exceed 75% of the total expenditure on legal proceedings;
(b) such aid shall not be considered for more than one legal proceeding in a particular matter;
(c) if more than one investors’ association applies for seeking legal aid, the investors’ association whose application is received first, shall be considered for such aid.
Reg 7, 8, 9 & 10 deals with the constitution of Advisory Committee, its functions, meetings and meeting the expenses.
Reg 11 – The Accounts of the fund shall be maintained in accordance with the SEBI(Form of Annual Statement of Accounts and Records) Rules, 1994 as far as such rules apply, which shall be audited within 6 months of Financial Year.
Reg 12 & 13 deals with relaxation of regulation & delegation.
Reg 14 read with the Schedule to the Regulation deals with amendment to Regulation 28 of SEBI Takeover Code, which is as under:
(a) in sub-regulation (12) , for clause (e) , the following shall be substituted, namely:-
“(e) the entire amount to the merchant banker, in the event of forfeiture for nonfulfillment of any of the obligations under the Regulations, for distribution in the following manner, after deduction of expenses, if any, of the merchant banker and
the registrars to the offer, -
(i) one third of the amount to the target company;
(ii) one third of the amount to the Investor Protection and Education Fund established by the Board;
(iii) one third of the amount to be distributed pro-rata among the
shareholders who have accepted the offer.”
(b) in sub-regulation (13) , for the words “to the regional stock exchange of the target company, for the credit of the Investor Protection Fund or any other similar fund” appearing after the words “ proceeds thereof” the words “to the Investor Protection and Education Fund established by the Board” shall be substituted.
