Comprehensive guidelines for Investor Protection Fund and Investor Services Fund at Stock Exchanges and Depositories
Summary
This section mandates the establishment of Investor Protection Funds (IPF) by stock exchanges and depositories, administered through separate trusts. It details the specific composition of these IPF Trusts, including the appointment of trustees from public interest, investor associations, and regulatory roles. Furthermore, it outlines the mandatory contribution sources for both entities and defines the permissible utilization of the fund corpus and its generated income. This section outlines the investment guidelines, reporting requirements, and corpus review mechanisms for the Investor Protection Fund (IPF). It details the procedures for inviting investor claims, determining eligibility, setting compensation thresholds, and disbursing funds from the IPF. Additionally, it establishes the framework for the Investor Services Fund (ISF), including its funding source and permitted utilization for investor education. This section mandates that interest earned on the Investor Security Fund (ISF) must be reinvested into the fund. It outlines the transfer of unutilized IPF and ISF balances to SEBI's Investor Protection and Education Fund upon the winding up or derecognition of a stock exch
Text
All stock exchanges and depositories shall establish an IPF. The IPF of the stock exchange and depository shall be administered through separate trusts created for the purpose.
The IPF Trust of stock exchange and depository shall consist of five trustees as under: a) Three Public Interest Directors (PIDs); b) One representative from the investor associations recognized by SEBI; and c) Chief Regulatory Officer or Compliance Officer.
The maximum tenure of a trustee (excluding the Chief Regulatory Officer or Compliance Officer, whose trusteeship would be co-terminus with their service) shall be five years or as specified by SEBI.
The stock exchange and depository shall provide the secretariat for their IPF Trusts respectively.
The stock exchange and depository shall ensure that the funds in the IPF are well segregated and that their IPF is immune from any liabilities of the stock exchange and depository respectively. Further, supervision of utilization of IPF and interest or income from IPF will rest with the IPF Trust.
1% of the listing fees received, on a quarterly basis.
100% of the interest earned on the 1% security deposit kept by the issuer companies at the time of the offering of securities for subscription to the public, immediately on refund of the deposit.
Penalty collected by stock exchanges from Trading Members (TMs) for deficiency in modification of client code, if any, pursuant to SEBI Circular No. CIR/DNPD/6/2011 dated July 05, 2011.
Penalty collected by stock exchanges from TMs for default in pay-in for certain trades during periodic call auction for Illiquid scrips, if any, pursuant to SEBI Circular No. CIR/MRD/DP/ 6/2013 dated February 14, 2013.
Penalties collected by stock exchanges from their listed companies for non-compliance with various requirements of the SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015 pursuant to SEBI Circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020.
Penalty collected from TMs for default in pay-in by an investor in an Offer For Sale (OFS) transaction – 10% of the order value pursuant to SEBI Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/10 dated January 10, 2023.
Contribution towards the IPF based on the transaction charges collected from the members of the exchange, as per policy of the respective stock exchange.
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Source: SecMarx — Comprehensive guidelines for Investor Protection Fund and Investor Services Fund at Stock Exchanges and Depositories. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.