The Securities and Exchange Board of India (SEBI), India's securities regulator, has issued guidelines to protect investors and increase market awareness. The Investor Protection Fund (IPF) and the Investor Services Fund (ISF) are governed by these rules. These guidelines, which go into effect on June 29, aim to protect investors and promote financial literacy in the securities market.
SEBI's guidelines mandate stock exchanges and depositories to establish separate IPFs, managed by dedicated trusts. The IPF Trust will comprise five trustees, including directors, an investor association representative, and a compliance officer. This separation guarantees efficient governance and protects investors.
To bolster the IPF, stock exchanges will contribute 1% of their listing fees quarterly, along with interest earned on security deposits and penalties collected from trading members. Depositories will contribute 5% of their annual profits from depository operations, fines, penalties, and income from IPF investments.
The IPF will play a vital role in addressing investment claims of affected investors due to defaulting trading members. It will also offer interim relief and support initiatives for investor education. Regular reviews will assess the adequacy of the IPF corpus, with necessary enhancements made if required.
SEBI's guidelines emphasize the establishment of the Investor Services Fund (ISF) by stock exchanges. At least 20% of the listing fees received by exchanges will be allocated to the ISF, dedicated to providing services to the investing public.
Supervised by the Regulatory Oversight Committee, the ISF's contributions and utilization will be effectively managed. The fund will primarily support investor education and awareness programs. Notably, a minimum of 50% of the ISF corpus must be spent in Tier II and Tier III cities, ensuring widespread access and inclusivity.
In the event of a stock exchange or depository winding up, derecognition, or cessation of operations, any remaining funds in the IPF and ISF will be transferred to SEBI's Investor Protection and Education Fund. This ensures continuous investor protection during organizational changes.
SEBI's comprehensive guidelines for the IPF and ISF exemplify their commitment to protecting investors and fostering market awareness. These guidelines establish a robust framework for governance, contributions, and utilization of these funds, fortifying India's capital markets. With a focus on investor protection and education, SEBI aims to create a secure and well-informed investment ecosystem for all stakeholders.
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