Sebi puts in place guidelines for IPF, ISF maintained by exchanges, depositories
The guidelines are about the constitution and management of the IPF, contribution to IPF by exchanges as well as depositories, and utilization of IPF
PremiumSebi puts in place guidelines for IPF, ISF maintained by exchanges, depositories
Securities and Exchange Board of India (Sebi) Tuesday came out with comprehensive guidelines for Investor Protection Fund (IPF) and Investor Services Fund (ISF) maintained by stock exchanges and depositories. The new guidelines would come into force from June 29.
The guidelines are about the constitution and management of the IPF, contribution to IPF by exchanges as well as depositories, and utilization of IPF.
The markets regulator also issued a detailed Standard Operating Procedure (SOP), indicating the process and timelines for the declaration of default of a trading member (TM), processing of investor claims out of IPF, and review of claims.
The Sebi said that all stock exchanges and depositories will establish an IPF. The IPF of the stock exchange and depository will be administered through separate trusts created for the purpose.
The IPF Trust of the stock exchange and Depository will consist of five trustees -- three Public Interest Directors, one representative from the investor associations, and a chief regulatory officer or compliance officer.
The maximum tenure of a trustee (excluding the chief regulatory officer or compliance officer) would be of five years or as specified by SEBI.
The stock exchange and depository will 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.
Concerning contributions of bourses, the Sebi said that stock exchanges will have to contribute 1% of the listing fees received on quarterly basis and the entire interest earned on the security deposit kept by the issuer companies at the time of the offering of securities for subscription to the public and penalty collected by exchanges from trading members.
Contribution to IPF of Depository
Sebi said that they have to contribute 5% of their profits from depository operations every year, all fines and penalties recovered from depository participants (DPs) and other users including and income received out of any investments made from the IPF.
The markets regulator said the amount in IPF will be used to meet the investment claims of the clients of the defaulting trading members, to pay interim relief to investors, and promote investors' education.
The stock exchanges and depositories will have to conduct a half-yearly review to ascertain the adequacy of the IPF corpus. In case the IPF corpus is found to be inadequate, the same would be enhanced appropriately, Sebi added
Investor Services Fund
The Capital markets regulator said that stock exchanges will have to set aside at least 20% of the listing fees received by ISF for providing services to the investing public.
To have better management and control of the contributions and utilization of the ISF corpus, supervision of the same will rest with the Regulatory Oversight Committee.
The ISF can be utilized only for promotion of investor education and investor awareness programmes through seminars, lectures, workshops, publications (print and electronic media), training programmes etc. aimed at enhancing securities market literacy and promoting retail participation in securities market.
At least 50% of the corpus should be spent in Tier II & Tier III cities, the Sebi said.
If a stock exchange or a depository is wound up or derecognized or exits, then the balance in the IPF and ISF lying unutilized with the stock exchange and depository will be transferred to the Investor Protection and Education Fund of Sebi.
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