NSE increases ceiling amount payable out of Investor Protection Fund Trust

Stock exchange NSE said on Wednesday that the Investor Protection Fund (IPF) Trust has increased the maximum limit against a single claim to Rs 35 lakh from the current level of Rs 25 lakh per investor per claim. The limit applies to claims received against trading members who are declared defaulters or are expelled, with effect from the same day. 

The Investor Protection Fund is the fund set up by the Stock Exchanges to meet the legitimate investment claims of the clients of the defaulting members that are not of a speculative nature. SEBI has prescribed guidelines for utilisation of IPF at the Stock Exchanges.

The Stock Exchanges have been permitted to fix suitable compensation limits, in consultation with the IPF/CPF Trust. It has been provided that the amount of compensation available against a single claim of an investor arising out of default by a member broker of a Stock Exchange shall not be less than Rs. 1 lakh in case of major Stock Exchanges viz., BSE and NSE, and Rs. 50,000/- in case of other Stock Exchanges.

What is the IPF Trust?

Based on the recommendations of the Member and Core Settlement Guarantee Fund Committee (formerly known as the Defaulters' Committee), the Investor Protection Fund Trust compensates investors to the extent of funds found insufficient in the defaulters' accounts to meet the admitted value of claim, subject to a certain limit. 

Before Wednesday, the maximum limit maximum Rs 25 lakh per investor per defaulter per expelled member was applicable in respect of claims arising on expulsion/declaration of default of members. 

Now, this limit has been extended to Rs 35 lakh. 

The stock exchange has established the fund with an aim of compensating investors in the event of defaulters' assets not being sufficient to meet the admitted claims of investors. 

The Investor Protection Fund Trust is managed by Trustees comprising public representatives, investor association representatives, board members, and senior exchange officials.