Corporate affairs ministry stops funding of investors’ forums without
giving any reason
August 29, 2011 02:45 PM |
Moneylife Digital Team
Funds were allocated to Investor Helpline and www.watchoutinvestor.com
from the Investor Education and Protection Fund, which was created
from unclaimed dividends and interest amounts from companies. Instead,
a bulk of the funds has been going to associations of industries, many
of which are responsible for investors’ problems
In a shocking move, the Investor Education and Protection Fund (IEPF),
administered by the Ministry of Corporate Affairs (MCA) has terminated
financial support to two projects, www.investorhelpline.in and
www.watchoutinvestor.com, without giving any reason. Both projects
benefited investors directly. Besides, the Fund itself has been
created from dividends and interest amounts not claimed by investors.
What is all the more shocking is that IEPF now seems to fund industry
associations, such as the Confederation of Indian Industry (CII), the
Federation of Indian Chambers of Commerce and Industry (FICCI),
Associated Chambers of Commerce and Industry of India (Assocham).
Representatives of these bodies have also been inducted into the IEPF
group of administrators and to help decide who gets the unclaimed
funds transferred to IEPF by companies.
Investor Helpline (www.investorhelpline.in) was launched in 2006 as an
alternative grievance redressal mechanism, while
www.watchoutinvestor.com is a database on the regulatory actions taken
by a slew of regulatory agencies against companies and market
intermediaries, and corporate decisions to change their name or
objects. Both websites were previously given financial aid by the
IEPF.
IEPF was created by an amendment to the Companies Act, which requires
companies to transfer seven years of unclaimed dividends and interest
to the Fund. Matured deposits and debentures of companies were also
credited to this fund. It also receives grants and donations from
central and various state governments. Over Rs400 crore has been
credited to the IEPF since its inception. The funds are first
transferred to the Consolidated Fund of India from where it is
allocated to the Investor Fund.
Interestingly, the ministry had early this year asked for a proposal
to enlarge the scope of the Investor Helpline project for allocation
of funds beyond the term of the project which expired on 30 June 2011.
But, in a letter dated 6 July 2011, MCA declined giving funds it
received through IEPF.
Moreover, the previous minister of corporate affairs Salman Khurshid
had acknowledged the role of Investor Helpline in response to a
question in parliament. He said, "The investor grievances redressal
mechanism at the website www.investorhelpline.in is also serving as a
useful electronic platform for the investors."
Virendra Jain, president, Midas Touch Investors Association, which set
up and operated Investor Helpline, was apparently told by the ministry
that financial support was being terminated because the grievance
redressal mechanism of the ministry was already doing a competent job.
Mr Jain contests the claim. He said MCA's track record of solving
investors' grievances is poor. Giving his own experience, he said that
around 2,000 investor complaints were forwarded by Investor Helpline
to the respective regional directors and registrars of companies, but
they received acknowledgment for less than 15% of the complaints.
While Investor Helpline and Watchoutinvestor have appealed to IEPF and
the MCA to continue the financial support, the composition of the Fund
board and the manner in which it spends its resources has erupted into
a contentious issue. It is not clear why IEPF administrators are
almost entirely from lobbying associations of industry or
intermediaries such as chartered accountants and company secretaries,
as well as representatives of stock exchanges. It is also very strange
that MCA does not think it necessary to appoint even one
representative of investors on the committee.
--
CA Ramachandran Mahadevan,M.Com.,F.C.A.,
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