IEPF

Presented by NISHA Raisetia

C ONTENTS
SEBI

Establishment Organizations Structure Current Board Members

Objectives of SEBI Functions of SEBI Powers of SEBI Various Departments & their functions SEBI & Central Government Few Cases SEBI Loopholes IEPF

E STABLISHMENT
In 1988 the Securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution, and was subsequently upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th January 1992.

PREAMBLE
The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as ..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto

O RGANIZATION S S TRUCTURE
4

Management of the Board

The Board shall consist of the following members, namely:a)
b)

a Chairman
Two members, One from amongst the officials of the Ministry of the Central Government dealing with Finance and second from administration of the Companies Act, 1956. One member from amongst the officials of the Reserve Bank of India. Five other members of whom at least three shall be the whole-time members to be appointed by the central Government .

c)

d)

C URRENT

BOARD MEMBERS

C URRENT BOARD MEMBERS CONTINUE ..

C URRENT BOARD MEMBERS CONTINUE ..

O BJECTIVES

OF

SEBI

The primary objective of SEBI is to promote healthy and orderly growth -of the securities market and secure investor protection. The objectives of SEBI are as follows:

To protect the interest of investors, so that, there is a steady flow of savings into the capital market.
To regulate the securities market and ensure fair practices. To promote efficient services by brokers, merchant bankers, and other intermediaries, so that, they become competitive and professional.

F UNCTIONS

OF

SEBI

The SEBI Act, 1992 has entrusted with two functions, they are

Regulatory functions And Developmental functions

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R EGULATORY F UNCTIONS

Regulation of stock exchange and self regulatory organizations. Registration and regulation of stock brokers, sub-brokers, Registrars to all issues, merchant bankers, underwriters, portfolio managers etc.

Registration and regulation of the working of collective investment schemes including mutual funds.
Prohibition of fraudulent and unfair trade practices relating to securities market. (Midcap Crash) Prohibition of insider trading Regulating substantial acquisition of shares and takeover of companies.

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D EVELOPMENTAL F UNCTIONS

Promoting investors education Training of intermediaries

Conducting research and publishing information useful to all market participants.

Promotion of fair practices Promotion of self regulatory organizations

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P OWERS

OF

SEBI

Power to call periodical returns from recognized stock exchanges.

Power to compel listing of securities by public companies.

Power to levy fees or other charges for carrying out the purposes of regulation.
Power to call information or explanation from recognized stock exchanges or their members. Power to grant approval to bye-laws of recognized stock exchanges.

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P OWERS

OF

SEBI

CONTINUE ..

Power to control and regulate stock exchanges. Power to direct enquiries to be made in relation to affairs of stock exchanges or their members. Power to make or amend bye-laws of recognized stock exchanges. Power to grant registration to market intermediaries. Power to declare applicability of Section 17 of the Securities Contract (Regulation) Act 1956, in any State or area, to grant licenses to dealers in securities.

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VARIOUS DEPARTMENTS UNDER SEBI

S. No. 1. 2. 3. 4. 5. 6. 7.

Name of Dept.
MARKET INTERMEDIARIES REGULATION AND SUPERVISION DEPARTMENT (MIRSD) DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD) INVESTMENT MANAGEMENT DEPARTMENT (IMD) INVESTIGATIONS DEPARTMENT (IVD) LEGAL AFFAIRS DEPARTMENT (LAD) OFFICE OF INVESTOR ASSISTANCE & EDUCATION (OIAE) DEPARTMENT OF ECONOMIC & POLICY ANALYSIS (DEPA)

8.

INFORMATION TECHNOLOGY DEPARTMENT (ITD)

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VARIOUS DEPARTMENTS UNDER SEBI CONTINUE

S. No. 9. 10. 11. 12.

Name of Dept.
MARKET REGULATION DEPARTMENT (MRD) CORPORATION FINANCE DEPARTMENT (CFD) INTEGRATED SURVEILLANCE DEPARTMENT (ISD) ENFORCEMENT OF DEPARTMENT (EFD)

13.
14.

ENQUIRIES & ADJUDICATION DEPARTMENT (EAD)

GENERAL SERVICES DEPARTMENT (GSD)

15.
16.

OFFICE OF THE CHAIRMEN (OCH)

THE REGIONAL OFFICES (ROs)

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SEBI & C ENTRAL G OVT.

The Central Government has power to issue directions to SEBI Board, supersede the Board, if necessary and to call for returns and reports as and when necessary. The Central Government has also power to give any guideline or to make regulations and rules for SEBI and its operations.
The activities of SEBI are financed by grants from Central Government, in addition to fees, charges etc. collected by SEBI. The fund called SEBI General Fund is set up, to which, all fees, charges and grants are credited. This fund is used to meet the expenses of the Board and to pay salary of staff and members of the body.

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R EGULATION BY SEBI: R ECENT C ASES

VEDANTA-CAIRN ISSUE

SEBI has not yet cleared Vedanta group's open offer for Cairn India, a mandatory requirement for conclusion of Londonbased mining group's $9.6 billion acquisition to foray into oil sector. London-listed Vedanta had in August last year agreed to buy up to 51 per cent stake in Cairn India from Cairn Energy Plc. Following the acquisition, its group firm Sesa Goa was to make an open offer for buying an additional 20 per cent in the company that owns India's largest on land oil field. But the company could not make the open offer following an oil ministry intervention with SEBI. The ministry said the deal was contingent upon government approval, which is still under process. SEBI is holding back the approval for the open offer as the government is yet to give its go ahead.

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R EGULATION BY SEBI: R ECENT C ASES

DECCAN-CHRONICLE HOLDINGS Ltd. ISSUE

Sebi allowed the Deccan Chronicle Holdings Ltd to buy-back 3.45 crore shares or 14.17 per cent equity from the market at an estimated cost of Rs 270 crore. This will be the second time the Deccan Chronicle would come out with an offer to buy-back its shares, following which the equity of the promoters in the company could go up to 73.83 per cent from 63.37 per cent currently. SEBI, while exempting Deccan Chronicle from making the mandatory public announcement before coming out with the buy-back offer, has, however, asked the company "not of seek any further exemption pursuant to any further buy-back".

Referring to the general issue of companies buying back their own shares, Sebi order said, "repeated buy-back offers by a company is not something that Sebi, as a regulator, would like to encourage, given the fact that it would be misused by entities to consolidate their holding at the expense of the company.

SEBI L OOPHOLES

Loopholes on preferential allotment of shares. There were several multi-national companies where promoters were making preferential allotment at the lower rate and selling it in the open market when the rates were high, raking in huge profits.

There were no restrictions on sale of shares by the preferential allottees in the open market other than the lock-in requirements. Companies can make preferential allotment by passing a special resolution of shareholders under Sec.81(1A) of the Companies Act, 1956 and in compliance with the conditions imposed by SEBI such as minimum pricing, disclosure to shareholders and lock-in of shares allotted on preferential basis, if they desire to seek listing at stock exchanges.

Companies have been making such preferential issue to persons including overseas entities also.

YES BANK IPO

What is the scam? It involved manipulation of the primary marketread initial public offers (IPOs)by financiers and market players by using fictitious or benaami demat accounts.

While investigating the Yes Bank scam, Sebi found that certain entities had illegally obtained IPO shares reserved for retail applicants through thousands of benaami demat accounts.
They then transferred the shares to financiers, who sold on the first day of listing, making windfall gains from the price difference between the IPO price and the listing price.

What is an IPO? An IPO is the first sale of an entity's common shares to public investors. When an entity wants to enter the market, it makes its share available to common investors in form of an auction sale. Each application for an IPO has to be within a cut-off figure, which is eligible for allotment in the retail investors category. But in this case, financiers and market players illegally cornered these retail investors' shares.

When was the scam detected? The IPO scam came to light in 2005 when the private 'Yes Bank' launched its initial public offering. Roopalben Panchal, a resident of Ahmedabad, had allegedly opened several fake demat accounts and subsequently raised finances on the shares allotted to her through Bharat Overseas Bank branches. The Sebi started a broad investigation into IPO allotments after it detected irregularities in the buying of shares of YES Banks IPO in 2005.

What triggered the Sebi probe? An Income Tax raid on businessman Purushottam Budhwani accidentally found he was controlling over 5,000 demat accounts. Sebi finds this suspicious. Sebi declared results of its probe, how a few people cornered a large chunk of YES Bank IPO shares. Roopalben Panchal was found to be controlling nearly 15,000 demat accounts.

It was found that once they obtained these shares, the fictitious investors transferred them to financiers.

The financiers then sold these shares on the first day of listing, reaping huge profits between the IPO price and the listing price.

Who is Roopalben Panchal? Roopalben Panchal of IndiaBulls Securities is allegedly the mastermind of the scam.

How is this different from Harshad Mehtas scam? The securities scam involved price manipulation in the secondary market, read stocks. Whereas in this case, the manipulation happened in the primary market even before the shares (IPOs) entered the stocks market. This time, fraudsters targeted the primary market to make a quick buck at the expense of the gullible small investors. Direct Participants (DPs) used retail applicants shares for reaping benefits in the stock market.

Sebi is to put in place an Integrated Market Surveillance System, IMSS, which will enable it to trace transactions in leading bourses like NSE and BSE along with depositories like NSDL and CDSL.

IEPF

IEPF

Investors Education and Protection Fund

The fund was set up under provisions of the Companies Act 1999.
There shall be credited to the Fund the following amounts, namely:a)
b)

amounts in the unpaid dividend accounts of companies;

the application moneys received by companies for allotment of any securities and due for refund; matured deposits with companies; matured debentures with companies; the interest accrued on the amounts referred to in clauses (a) to (d);

c) d) e)

f)

grants and donations given to the Fund by the Central Government, State Governments, companies or any other institutions for the purposes of the Fund; and the interest or other income received out of the investments made from the Fund;

g)

Provided that no such amounts referred to in clauses (a) to (d) shall form part of the Fund unless such amounts have remained unclaimed and unpaid for a period of seven years from the date they became due for payment.

C ONSTITUTION OF THE
COMMITTEE

Main Committee

SubCommittees

F UNCTIONS OF IEPF

The Committee shall recommend the following activities relating to investors education, awareness and protection:

Education Programs through Media Organizing Seminars and Symposia

Proposals for registration of Voluntary Associations or Institution or other Organizations engaged in Investor Education and Protection activities
Proposals for projects for Investors Education and Protection including research activities and proposals for financing such projects Coordinating with institutions engaged in Investor Education, awareness and protection activities

AN

ILLUSTRATION

(HDFC)

Unclaimed Dividend: Dividends that are not enchased or claimed, within seven years from the date of its transfer to the unpaid dividend account, will, in terms of the provisions of Section 205A of the Companies Act, 1956, be transferred to the Investor Education and Protection Fund (IEPF) established by the Government. In terms of the provisions of Section 205C of the Companies Act, 1956, no claim shall lie against the Corporation or the said Fund after the said transfer. The details of unclaimed dividend as on July 31, 2012 are as follows:

Financial Year

Unclaimed Unclaimed Dividend as on Dividend as % July 31, 2012 to total dividend payable 56,89,059 72,65,800 88,21,978 0.13 0.15 0.16

Date of declaration of Dividend

Last date for claiming Dividend

2004-05 2005-06 2006-07

July 15, 2005 July 18, 2006 June 27, 2007

August 22, 2012 August 24, 2013 August 04, 2014 August 22, 2015 august 28, 2016 August 21, 2017 August 8, 2018

2007-08

1,11,01,550

0.16

July 16, 2008

2008-09 2009-10 2010-11

1,46,44,260 1,92,83,364 2,57,50,026

0.17 0.18 0.19

July 22, 2009 July 14, 2010 July 8, 2011

2011-12

6,50,87,209

0.40

July 11, 2012

August 10, 2019

C RITERIA FOR F INANCIAL A SSISTANCE

Any entity that has a viable project proposal on investor education and protection shall be eligible for assistance. The limit for each entity for assistance from IEPF shall be subject to 5% of the budget of IEPF during that financial year and not exceeding 80% of the amount to be spent on the proposed programme/activity. The entities already engaged in activities relating to investor awareness, education and protection and proposing to take up investors programmes, organizing seminars, symposia etc. shall undertake projects for investor protection including research activities.

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Prateeksha Jain

Pragya Tripathi

Thank You
Rachana

Rachit Rastogi