Investor education body IEPFA moots simpler refund process

Investor education body IEPFA moots simpler refund process

In a bid to simplify and expedite claims settlement, the Investor Education & Protection Fund Authority (IEPFA) has proposed an overhaul of the refund process including a real-time online interface with the company and the claimant, as well a limitation period.

The move comes at a time when there is a huge backlog of unclaimed shares with the authority.

Under the current process, the claim filed to the authority needs to first verified by the companies. The companies are mandated to send an e-verification report along with documents submitted by the claimant.

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“There is often a considerable delay in submission of the e-verification report by companies or the companies submit report without requisite documents required under the rules or the companies reject the claim in its verification report without intimating the claimant,” the authority noted in the consultation paper. It has invited comments by January 27 this year.

The IEPFA has now proposed that after the claim is filed, the claimant and the company will be able to iterate the case between them online on a realtime basis, till documentary requirements are complete and case is considered for final approval by the company. “The IEPFA will enforce the timelines and the documentation procedure within which the company has to dispose the claim,” it has further said.

Cases, claims are proposed to be categorised according to their nature and based on their market value. Certain type of claims below a threshold, for the same shareholder or investor, where there are minor changes like address change, bank account number change can be made STP (Straight Through Process) based on approval report of the company.

It has suggested that after the approval, share and amount will be transferred by the Authority to the respective company through reverse corporate action, which in turn will transfer the same to respective claimants. “Company will be responsible to transfer the shares and amount to claimant through corporate action, once it is received by it from IEPFA,” it said, adding that it will enforce the timelines through penalties and interest.

Another proposal is to introduce a limitation threshold of about 10 years from the date of transfer of shares to the IEPFA, after which it can sell the shares to convert it into money, which can be claimed by the claimant. “This can be considered as a measure of Investor Protection as Companies undergo many corporate restructurings including merger, demerger, delisting,” it said, adding that in case of restructuring or insolvency, the value of the share gets eroded.

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It has also proposed another a period of limitation of 20 or 25 years, after which the claims can be considered time barred. The government had notified the Investor Education and Protection Fund Rules, 2016 for facilitating refund of claims in respect of shares, unclaimed dividends, debentures. For filing of refund, the investor the investor makes an online application on the authority’s website, which then has to be verified by the company.