Attempts have been made by the three major regulators in the financial sector in India, namely RBI (Reserve Bank of India), SEBI (Securities and Exchange Board of India) and MCA (Ministry of Corporate Affairs), to educate investors and increase awareness among them of their rights.
As part of the law, these bodies are required to protect the interest of the participants in their constituents like banks, stock exchanges or companies as they deal with public money and ensure that the money is not wrongly exploited for personal gains. In order to do it, they create investor education funds.
Even if you have invested in equity, you are most likely to hold a bank account and that is why you should know about the investor education funds in India and what purpose they serve.
- NSE and BSE, the two stock exchange houses in India, have Investor Protection Funds that are funded by contributions from the gross turnover of its members and as a part of the listing fees and security deposit collected by these exchanges.
- MCA has IEPF (Investor Education and Protection Fund) which collects the money unclaimed by shareholders for over seven years. It could be dividends, matured deposits or debentures and share application money that companies are supposed to transfer to their shareholders. These may not have been credited to the shareholders due to lack of bank account information of the shareholders, especially if they hold shares in physical form.
- RBI created a fund called DEAF (Depositor Education and Awareness Fund) where banks have to transfer money from accounts that have not been operated for more than 10 years.
- SEBI has an Investor Protection and Education Fund (IPEF) that hold contributions by the regulator and donations from the State and Central Governments towards investor awareness.
- Mutual Fund houses are required to set aside 0.02 percent of their assets towards investor education and awareness initiatives.
Why should you as an investor be aware of these facilities?
Markets are ever evolving and their developments are fast paced. Amid Ponzi schemes and other fraudulent activities that have occurred in the last few years alone, you as an investor should be aware of the new rules and products that the market has and what are the risks in staying invested in certain products. As a practice, never invest in a financial product that you cannot make sense of. It is your money and you are liable to know of the rights you hold and not blindly fall for claims made by agents.
If you have limited knowledge regarding these, there are several seminars, and education material provided by these funds both online and offline that you have all time access to. These educative materials will inform you of what you can do in situations where you become a victim of a fraud or how you can prevent it from happening to you.
Whether you an investor in a mutual fund scheme, company or have a bank account, you should try and gain access to these educational programmes since you have already indirectly paid for them.