Introduction to IEPFA:
The Government of India has started a program to create awareness and guidance among the investors with the help of the Ministry of Corporate Affairs. The objective of this authority is to create awareness among the investors to protect their interests. The investors in India are now taking part in the investment activities that raise the need for proper awareness and the protection from frauds and misleading guidance on investment. This fund authority does not provide any investment advice. It provides the guidelines for the interests of the investors only to protect them from frauds in the trading.
What is Demat Account ?
A Demat Account is a digital form of account that holds the securities for trade. It provides the facility to keep the securities online and in electronic form. There are various benefits of these accounts. The following are some benefits of Demat Account:
- It does not require the paper format of securities for trading.
- It protects the investors from physical theft, wear, and tear of the paper securities.
- It saves a lot of time by fastest transfer of ownership between beneficiary owners.
In India, CDSL and NSDL are two free Demat Account service providers. The CDSL is a depository of BSE Ltd and the NSDL is a depository of NSE Ltd. Apart from depositories, there are some other contributors such as depository participants and beneficial owners. Different private brokers such as Angel Broking, Groww, and Zerodha, provide services for the Demat account opening. These brokers and depository participants charge brokerage fees and other charges for trading. These charges may vary from one service provider to another.
Guidelines on Demat Account of IEPFA:
In 2017, the Ministry of Corporate Affairs has notified with a general circular on 24th April 2017 that the companies registered under the Companies Act, 2013 are required to transfer the unpaid dividend accounts of the last 7 years to the IEPF suspense account.
- As per the notification by the circular, the IEPF has decided to open an account with NSDL (National Securities Depository Limited) to facilitate the transfer of the Demat Account of authority.
- Every company under the Companies Act, 2013 is required to transfer the shares (either in Demat form or physical form) to the special account opened with NSDL by the IEPF Authority. The companies are also required to prescribe information about the shares.
- To open a Demat account and maintenance, the NSDL charges the specific charges for the record maintenance. The transaction fee per record is Rs. 10. The annual maintenance charges are Rs. 11 per record.
- These accounts are in the pure electronic form, which facilitates the investors and the companies from physical loss on the shares.
The Demat account opening by Investor Education and Protection Fund Authority is beneficial for the investors as well as the companies. Before this account service, the companies needed to maintain the records physically. The physical record maintenance has created different issues in front of the companies and the brokers. The T+2 day’s settlement of shares would not be possible sometimes. The transfer of securities from one party to another was a tedious process. The most important issue with the physical share transfer is the theft and misplacement.
With these Demat trading meaning services, the companies are now facing negligible issues related to the share transfer. The step taken by IEPF provided great help for the companies and the share brokers along with the investors. Now the investors can open a Demat Account in just a few minutes without any initial fees. Trading with electronic accounts is also very cheap and less costly.