SEBI recommends rules for unclaimed funds on non-convertible securities
SEBI recommends rules for unclaimed funds on non-convertible securities
Seeks public comments on the proposal until 14 November
The Securities and Exchange Board of India (SEBI) has proposed changes to align certain regulations. It is for entities issuing non-convertible securities, which standardize the process for handling unclaimed amounts by allowing their transfer only after seven years from maturity.
SEBI’s consultation paper mentioned the amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations to align them with the provisions of the Companies Act, 2013, and the Investor Education and Protection Fund (IEPF) Rules.
Currently, Section 125 of the Companies Act mandates that unclaimed amounts (including matured debentures and the accrued interest) be transferred to the IEPF only after seven years.
Meanwhile, Rule 3 (3) of the IEPF clarifies that unclaimed interest must be transferred along with the matured debenture amount after seven years.
However, Regulation 61A of the LODR requires that any unclaimed interest held in an escrow account for seven years be transferred to the IEPF or the Investor Protection and Education Fund (IPEF), irrespective of whether the debentures have matured. This created an inconsistency between the two frameworks.
To address the confusion, the market regulator has proposed substituting Regulation 61A(3) with a new provision mandating the transfer of unclaimed amounts to the IEPF only seven years after maturity of the debentures.
As for entities not covered under the Companies Act, the funds will be transferred to SEBI's IPEF after the same period.
The market watchdog stated, "The amendment would help bring standardization across all entities having non-convertible securities in terms of dealing with unclaimed amounts and facilitate ease of doing business, as the entities shall have to transfer the amounts remaining unclaimed only once after completion of seven years from maturity."
The modification will benefit the investors as they can directly approach the entity (up to seven years from maturity of the debt), to claim a refund, instead of approaching the IPEF/IEPF.
