Securities and Exchange Board of India (‘SEBI’) has continued its commitment to safeguarding investors and enhancing the transparency and efficiency of financial markets with its latest amendment to the Securities and Exchange Board of India (Investor Protection and Education Fund) Regulations, 2009. On October 20, 2023, SEBI notified the SEBI (Investor Protection and Education Fund) (Second Amendment) Regulations, 2023 to amend the SEBI (Investor Protection and Education Fund) Regulations, 2009. The provisions came into force on October 20, 2023.

The notable changes include the amended provisions of regulation 4 and regulation 5. Regulation 4 provides for amounts that can be credited to the IPEF and Regulation 5 provides for utilization of amounts credited to the Fund.

Key Points:

Regulation 4 relating to “Amounts to be credit to the Fund” has been revised.  The following amounts have been introduced which will be added to Investor Protection and Education Fund (‘Fund’):

• monies transferred in accordance with the Regulation 61-A (3) Proviso of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 which says that any amount transferred to the escrow account that remains unclaimed for seven years will be transferred to the Fund.
• monies transferred in accordance with the Regulation 18 (16) (f) of the SEBI (Real Estate Investment Trusts) (‘REIT’) Regulations, 2014 which says that any amount remaining unclaimed or unpaid out of the distributions declared by a REIT will be transferred to the Fund.
• monies transferred in accordance with the Regulation 18 (6) (e) of the SEBI (Infrastructure Investment Trusts) (‘InvIT’) Regulations, 2014 which says that any amount remaining unclaimed or unpaid out of the distributions declared by a InvIT will be transferred to the Fund.

This expansion is a strategic move to ensure that the fund has a broader base of financial support, further reinforcing investor protection.

Regulation 5 relating to “Utilisation of Fund” has been revised. Earlier, the Fund was used to make restitution to eligible and identifiable investors who have suffered losses resulting from violation of securities laws. Now, the Fund will also be made available for rewarding informants who provide original information to SEBI to recover the amounts directed to be disgorged. The amounts credited to the Fund will be utilized to make refunds to the entities transferring the said amounts, pursuant to their making payment to eligible and identifiable investors and making a claim to the Fund. No claim for restitution from the disgorged amounts in a specific case will be admissible after a period of 7 years from the date of invitation of claims for disgorgement.

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