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In a move that would instil more investor confidence, Multi Commodity Exchange has enhanced the maximum compensation payable to investors in case of default to Rs 25 lakh from Rs 2 lakh.
MCX has also removed the cumulative cap of Rs 2 crore on the compensation paid to all investors against single defaulter. The exchange will pay the compensation from the Rs 179-crore investor protection fund (IPF) set up using the penalty levied on errant investors since 2012.
The objective of the fund is to compensate investors if the defaulters’ assets are not sufficient to meet the legitimate claims of investors. It is also used to promote investors’ awareness to enhance literacy and such purpose as mandated by market regulator Securities and Exchange Board of India.
The revision in compensation will be applicable to claims arising from clients of SEBI registered member and the declaration of default from January 24. In the event of default by the member, all transactions executed on the exchange platform shall be eligible for settlement from IPF subject to the norms of the exchange.
The IPF is managed by three public interest directors, a representative from SEBI recognised investor association and the compliance officer of the exchange.
The change in compensation has been implemented in consultation with the IPF Trust to strengthen the confidence of investors in commodity derivatives market, said a MCX spokesperson.
All investors, especially individuals, MSMEs and SMEs will have a greater sense of protection while transacting on MCX, he added.
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