Investor associations cry foul as Ministry closes Helpline
Business Line, 12/9/2011
Closing of Investor Helpline by the Ministry of Corporate Affairs (MCA) has not gone down well with investor associations.
While the Ministry says it closed the helpline in June to avoid duplication of work, it is being alleged that there is a money grab by industry associations.
The Ministry is better equipped to handle investor grievances than anyone else, said an MCA official.
“The number of complaints being registered on our website was increasing and those on the helpline were decreasing for more than a year now,” an MCA official told Business Line. According to IH, it received 14,300 grievances in 4.5 years and resolved or closed 98 per cent of them. The Ministry, however, was not able to share the number of grievances it received or closed despite repeated requests.
Questions are being raised by some investor associations on operations of Investor Education and Protection Fund (IE&PF) and the committee that administers it.
A committee of 12 with a two-year term is formed to administer the IE&PF. MCA Secretary is the Chairman and the committee must have representations from RBI, SEBI and other organisations actively involved in investor activities. IE&PF has 174 NGOs registered with it as on March 31, according to the website. Some of its past members are Ms Sucheta Dalal of Moneylife, Mr P.N. Vijay, Tamil Nadu Investors’ Association and Mr Manu bhai Shah of CERC.
In February 2009, representatives of industry chambers such as FICCI, CII, ASSOCHAM and NSE entered the committee with not even a token presence of an NGO, non profit organisation or investor activist. In May 2010, an extension for two more years was issued to the committee that also had representatives from professional institutes CA, ICSI and ICWA.
“What is the NSE Managing Director doing on the IEPF? He has a few hundred crores under an investor protection fund of the NSE, why doesn’t he concentrate on spending that? Especially when the number of retail investors in India has shrunk from 20 million to 8 million in the past 20 years,” said Ms Sucheta Dalal.
The committee has suo moto powers to call upon any company to pay due to the fund. This constitutes an inherent contradiction in the nature of IEPF and its responsibilities, said Mr Virendra Jain, President, Midas Touch Investors Association that set up IH.
“These institutes and the industry chambers have direct pecuniary and professional relations with the companies against whom the IEPF is supposed to protect the investor’s interest,” he said.
In 2010-11 more than 3,500 seminars were held from the fund. The primary objectives of the Fund according to the Act are “promotion of investors’ awareness” and “protection of the interests of investors.”
IE&PF was established under the Companies Act, 1956, to promote investor awareness by utilising the funds that are unclaimed for seven years such as dividends, deposits, debentures, etc of investors.
The unclaimed amount is transferred to a central corpus, which is Rs.500 crore as on date, with an annual budget of Rs 5 crore. The online grievance redress portal, investor helpline, was receiving Rs 50 lakh an year.