The Securities and Exchange Board of India (SEBI) on May 30, 2023, issued a notification regarding the Comprehensive guidelines for Investor Protection Fund and Investor Services Fund at Stock Exchanges and Depositories
This has a reference to SEBI circular no. MRD/DoP/SE/Cir-38/2004 dated October 28, 2004, had issued comprehensive guidelines for Investor Protection Fund (IPF) to be maintained by Stock Exchanges, and the SEBI circular No.SE/10118 dated October 12, 1992, that advised stock exchanges to establish an Investor Services Fund (ISF)
The provisions of this Circular shall come into effect from the 30th day of issuance of this circular
The following guidelines on the IPF and ISF have been stated namely: -
• It states that 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 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. The supervision of the utilization of IPF and interest income will rest with the IPF Trust.
• The Contribution and Utilization of IPF and interest income from the IPF of the Stock Exchange and Depository have been stated
• A detailed (SOP), indicating the process and timelines for declaration of default of a TM, processing of investor claims out of IPF and review of claims was prescribed through various letters to stock exchanges and has been placed in Annexure-1
• It states that all stock exchanges shall set aside at least 20% of the listing fees received for ISF for providing services to the investing public, in order to have better management and control on the contributions and utilization of ISF corpus, supervision of the same will rest with the Regulatory Oversight Committee.
• It further states that All previous communications or directions by SEBI, through various letters or e-mails, etc. pertaining to the periodicity of review of IPF corpus, utilization of interest of IPF, SOP indicating timeline for processing of claims, review of claims, etc., disclosure of IPF corpus and policy of processing of investor claims and implementation of amendment of policy on the processing of investor claims will stand rescinded with effect from the date of implementation of this circular.
• The Stock Exchanges and Depositories are advised to perform the following functions namely: -
i. Take necessary steps and put in place the necessary systems for implementation of the above.
ii. make necessary amendments to the relevant bye-laws, rules, and regulations for the implementation of the above
iii. bring the provisions of this circular to the notice of market participants (including investors) and also disseminate the same on their website
• This circular is available on the SEBI website at www.sebi.gov.in at “Legal Framework-Circular"
[Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/81]
