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TMI BlogComprehensive guidelines for Investor Protection Fund and Investor Services Fund at Stock Exchanges and DepositoriesX X X X Extracts X X X X X X X X Extracts X X X X ..... he comprehensive guidelines for IPF and ISF are as under: I. Investor Protection Fund A. Constitution and Management of the IPF i. 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. ii. 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. iii. 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. iv. The stock exchange and depository shall provide the secretariat for their IPF Trusts respectively. v. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of IPF and interest or income from IPF i. The amount in IPF and any interest or income generated from the IPF of the stock exchanges and depositories shall be utilized for the purposes as stated in the table below: SN Particulars Utilization 1 IPF Stock Exchanges: a) To meet the legitimate investment claims of the clients of the defaulting TMs. b) To pay interim relief to investors, if any, in terms of paragraph-2(D) of circular No. SEBI/HO/MRD1/ICC1/CIR/P/2021/625 dated September 02, 2021, if any. Depository: a) 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; b) To utilize the fund for supporting initiatives of DPs for promotion of investor education and investor awareness programmes; c) To meet the legitimate claims of the beneficial owners, upto the maximum cap as to be determined by the depository, in case the same is not settled by the beneficial owner indemnity insurance; d) To utilize the fund in any other manner as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the respective governing boards of the stock exchanges and depository. The investments shall be adequately diversified with single issuer exposure, excluding Government securities, not exceeding 10% of the IPF corpus. The investment policy shall be devised with an objective of capital protection, portfolio diversification, liquidity, along with highest degree of safety and least market risk. ii. The balance available in the IPF as at the end of each month and the amount utilised during the month including the manner of utilization shall be reported to SEBI in the Monthly Development Reports of the stock exchanges and depository respectively. F. Review of IPF Corpus i. The stock exchanges and depositories shall conduct half-yearly review (by end of March and September every year) to ascertain the adequacy of the IPF corpus. In case the IPF corpus is found to be inadequate, the same shall be enhanced appropriately. G. Timelines for declaration of default of a TM, processing of investor claims out of IPF and review of claims i. A detailed Standard Operating Procedure (SOP), indicating the process and timelines for declaration of default of a TM, processing of investor c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds are inadequate. In such cases, IPF Trust shall satisfy itself that such claim could not have been filed during the specified period for reasons beyond the control of the claimant. b) shall not be considered eligible for compensation from IPF in case where the surplus funds of the defaulter TM is returned to the defaulter TM. The same shall be borne by the stock exchange after scrutinizing and satisfying itself that such claim could not have been filed during the specified period for reasons beyond the control of the claimant. iv. Any claim received after three years from the date of expiry of the specified period may be dealt with as a civil dispute. v. The claims of only the investors or clients shall be eligible for compensation from the IPF and in no case the claims of a TM or an associate of the TM of the stock exchange shall be eligible for compensation out of the IPF. vi. The claims of the investors or clients arising out of speculative transactions shall not be eligible for compensation from the IPF. J. Threshold limit for claims i. The stock exchanges shall fix suitable per investor compensation limits, in consultation with the IPF Trust and SEBI. ii. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of expiry of specified period. Any amount realized from assets of defaulter TM and being retained by stock exchange shall be kept in a separate interest bearing account and in case the funds remained unclaimed after the timeline the same shall be returned to the defaulter TM. M. Disclosures i. The stock exchanges and depositories are advised to a) Disclose the corpus of the IPF on its website and update the same on a monthly basis. b) Disseminate its policy on processing investor claims from IPF on their website including the compensation limit fixed by them per investor. c) To frame FAQs on their policy on processing investor claims for easy understanding of investors. d) Give adequate notice (including a press release) to the investors before implementing any amendment in the policy on processing of claims. In case of any amendment in the policy on processing of investor claims, the same should not be applicable to the TMs who have been disabled or suspended or declared defaulter by the exchange prior to the effective date of implementation of policy. II. Investor Services Fund of Stock Exchanges i. The stock exchange shall set aside at least 20% of the lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07, 2016, h) Paragraph 2C of Circular No. SEBI/HO/DMS/CIR/P/2017/15 dated February 23, 2017, i) Paragraph 1 of Circular No. SEBI/HO/MRD/DDAP/CIR/P/2020/16 dated January 28, 2020 and j) Paragraph 2C of Circular No. SEBI/HO/MRD1/ICC1/CIR/P/2021/625 date September 02, 2021 iii. All previous communications or directions by SEBI, through various letters or e-mails, etc. pertaining to 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 processing of investor claims will stand rescinded with effect from the date of implementation of this circular. V. Stock Exchanges and Depositories are advised to: i. take necessary steps and put in place necessary systems for implementation of 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 to disseminate the same on their website. VI. This circular is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt would be required to fill claim forms either online or offline, by making necessary changes in the pre-filled claim form and providing additional details. * Supporting documents such as relevant bank statements, demat statements, client ledger, etc. needs to be provided along with the claim form. * The client should provide the bank account details for disbursal of the amount at this stage itself in case the claim is admitted. * Exchange may seek additional documents, if required, on case to case basis. T+75 days 5. Declaration of default of the TM * The exchange will declare the TM a defaulter after completing the due process for declaring a TM as a defaulter. * Extension of timeline beyond T+120 days, if any, for declaration of default of the TM would be subject to approval of SEBI. * The notice should also invite claims, from those clients who have not submitted their claims earlier, along with all supporting documents. T+120 days 6. Intimation to investors about declaration of TM as a defaulter. * The stock exchange shall issue the Public Notice on default of the TM immediately on their website. On the day of declaration of default of the TM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but before the declaration of the TM as defaulter, if approved by the IPFT, shall be settled within 60 days from the date of such declaration. 3. All claims received on or after the date of declaration of the TM as defaulter, if approved by the IPFT, shall be settled within 60 days from the date of receipt of such claims. 8. Request for review of the claim from the client (First Review) In case the client is not satisfied with the processing of his claim, the client can file a review with the Member and Core Settlement Guarantee Fund Committee (MCSGFC) (first review). Within 90 days of receipt of intimation of the decision of the IPFT from the stock exchange The MCSGFC will review the claim and inform the same to the client. Within 60 days of receipt of review application. 9. Request for review of the claim from the client (Second Review) In case the client is still not satisfied with the first review by the MCSGFC, the client can file the second review application with the committee of Public Interest Directors (PIDs). The Committee of PIDs, wherever possible, shall consist of PIDs not forming part of the MCSGFC. Within 90 days of receipt of intimation of deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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