One percent of the turnover fee collected by stock exchanges with commodity-derivatives segment from its trading members or Rs 10 lakh, whichever is higher in the financial year, will be taken as contributions to the Investor Protection Fund (IPF).
The fund is being set up to meet the legitimate investment claims of clients of defaulting trading members.
In a circular dated May 30, the Securities and Exchange Board of India (Sebi) released the guidelines for IPF and Investor Services Fund (ISF) for exchanges that have a commodity-derivatives segment. So far, guidelines to collect and manage these funds were issued only for exchanges and depositories that do not have this segment.
Also read: Sebi eases norms for stock brokers to provide internet-based trading
These exchanges will also have to contribute the interest or income received out of investments made from the IPF, and all the penalties levied and collected by them.
Under the latest guidelines, all exchanges are required to set up IPF and ensure that the fund is administered through a separate trust created for this purpose.
Research activities
The guidelines elaborate on the utilisation of the income from the fund towards research activities.
The exchanges can use the interest or income earned from the IPF towards research activities related to the commodities market, provided these activities are undertaken after getting written approval from the trustees of the fund.
Not more than 10 percent of the interest amount earned from the fund should be used for research. The fund has beena sked to identify public and private academic institutions, professional bodies, trade (physical market) associations and industry bodies/ chambers through/ with whom such Research activities shall be undertaken/ organised/ sponsored.
The trutees will need to consider and record the reasons, relevance and stated objectives of the research activity / project while according approval. The Board of stock exchange will need to be apprised of the research activities once in half a year of a financial year.
Besides research activities, the other uses of the interest income from the fund include investor awareness and education, capital expenditure towards the setting up of investor service centre (ISC), setting up an investor-focussed website, and administrative and statutory expenses.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
