SEBI INVESTOR PROTECTION AND EDUCATION FUND

[Mr. M. GOVINDARAJAN]

Investor Protection and Education Fund

Securities and Exchange Board of India (‘Board’ for short) created a Fund called as ‘Investor Protection and Education Fund’ (‘Fund’ for short) under the provisions of Section 11 of the Securities and Exchange Board of India Act (‘Act’ for short).  This fund is different from the Fund called ‘Investor Education and Protection Fund’ created under the Companies Act, 2013.  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 the Act.

Sources of the Fund

The following amounts shall be credited to the Fund-

• contribution as may be made by the Board to the Fund;
• grants and donations given to the Fund by the Central Government, State Government or any other entity approved by the Board for this purpose;
• proceeds in accordance with the sub-clause (ii) of clause(e) of sub-regulation (10) of  regulation 17 and sub-regulation (3) of regulation 21 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
• 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;
• amounts in the Investor Protection Fund and Investor Services Fund of a stock exchange, in the event of de-recognition of such stock exchange;
• amounts forfeited for non-fulfillment of obligations specified in regulation 15B of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998;
• monies transferred in accordance with regulation 45(9) of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;
• amounts disgorged under section 11B of the Act or section 12A of the Securities Contracts(Regulation) Act, 1956 or section 19 of the Depositories Act, 1996;
•  interest or other income received out of any investments made from the Fund;
• such other amount as the Board may specify in the interest of investors.

The above said amount shall be credited to the Fund through NEFT/RTGS/IMPS or online payment using the SEBI Payment Gateway or any other mode as may be specified by the Board from time to time.

Utilization of Fund

The Fund shall be utilized for the protection of investors and promotion of investor education and awareness.  The Fund may be used for the following purposes-

• educational activities including seminars, training, research and publications, aimed at investors;
• awareness programmes including through media - print, electronic, aimed at investors;
• funding investor education and awareness activities of Investors’ Associations recognized by the Board;
• 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;
• refund of the security deposits which are held by stock exchanges and transferred to the Fund consequent on de-recognition of the stock exchange as mentioned in clause (d) of regulation 4, in case the concerned companies apply to the Board and fulfill the conditions for release of the deposit;
• any reward under the guidelines as may be issued by the Board from time to time for the grant and payment of reward to the informants for providing original information to the Board to recover amounts under section 28A of the Act or section 23JB of the Securities Contracts (Regulation) Act, 1956 or section 19-IB of the Depositories Act, 1996; and
•  such other purposes as may be specified by the Board.

Disgorged amount

The amounts disgorged and credited to the Fund and the interest accrued thereon shall, in cases where the Board deems fit to make restitution to eligible and identifiable investors who have suffered losses resulting from violation of securities laws or for rewarding informants who provide original information to the Board to recover amounts directed to be disgorged, be utilized only for the purposes of such restitution or reward.  The monies left in the Fund after earmarking the amount for the process of restitution to eligible and identifiable investors may be utilized for the above said purposes.

No claim for restitution from the disgorged amounts in a specific case shall be admissible after a period of 7 years from the date of invitation of claims for disgorgement in the said case by the Board.

Conditions for aid

The aid to investors’ associations shall be given by the Board in accordance with the guidelines made by it and subject to the following conditions-

• the aid shall not exceed 75% of the total expenditure on legal proceedings;
• such aid shall not be considered for more than one legal proceeding in a particular matter;
• 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.

Advisory Committee

The Board Constituted an Advisory Committee containing the following members-

• the Executive Director of the Board in charge of Office of Investor Assistance and Education who shall be the convener of the Committee;
• two other officials of the Board;
• five other members who have expertise about the securities market and experience in matters of investor grievance redressal or investor education.

The tenure of the members shall be 2 years which may be extended for a further period of 2 years.  Any vacancy arising out of resignation, retirement or death of a member or for any other reason shall be filled by the Board for the remaining period of the term of such member.   The Board is having power to dissolve and reconstitute the Committee if, at any time, the Board is of the opinion that the Committee is unable to discharge the functions and duties imposed on it by or under these regulations.

The committee may recommend investor education and protection activities that may be undertaken directly by the Board or through any other agency, for utilization of the Fund. 

Meetings of the Committee

The meetings of the Committee shall be convened at least once in 3 months by the convener.  If the convener is absent the same may be convened by any other member.  The quorum for the meeting is 4 members.  Every member, who is directly or indirectly interested in any matter coming up for consideration at a meeting of the Committee, shall disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the meeting of the Committee and such member shall not take part in any deliberation of the Committee with respect to that matter.

The expenses including travel and other allowances of members of the Committee, who are officials of the Board, and invitees who are officials of the Board, shall be borne by the Board in accordance with their entitlements.  The expenses including travel and other allowances of members of the Committee, who are not officials of the Board, and invitees who are not officials of the Board, may be borne by the Fund.

Accounts and Audit

The Board shall ensure maintenance of proper and separate accounts and other relevant records in relation to the Fund giving therein the details of all receipts to, and, expenditure from, the Fund and other relevant particulars in accordance with the SEBI (Form of Annual Statement of Accounts and Records) Rules, 1994 as far as such rules apply.  The accounts shall be prepared and audited before the expiry of 6 months from the end of each financial year.   The accounts of the Fund may be audited in the manner of audit of other accounts of the Board.

Investment

The investment of the Fund may be in the manner of investments of other funds of the Board.