SEBI asks BSE to review investor protection fund

Our Bureau Mumbai | Updated on November 17, 2020 Published on November 17, 2020

The BSE on Tuesday said SEBI had directed the exchange to conduct an annual review to ascertain the adequacy of its investor protection fund (IPF), disclose the corpus on its website and update the same on a monthly basis. A SEBI directive has also been sent to NSE, the sources said.

Speaking at a virtual conference organised by the Confederation of Indian Industries (CII) on October 21, SEBI Chairman Ajay Tyagi had expressed his concerns about the low corpus of the IPF maintained by the stock exchanges and said the regulator would take corrective measures. Tyagi had made the comments while responding to a question from BusinessLine.

Currently, BSE has ₹784 crore in its IPF kitty while NSE that churns 85-90 per cent higher volumes has only ₹594 crore. Annual profits and earnings of exchanges are way higher.

Also, broker defaults in the past couple of years have been on the rise and the funds would be woefully short if every investor has to be paid. It is one of the reasons the stock exchanges are delaying declaring brokers as defaulters, and have even imposed a cap of ₹25 lakh for pay- out to each investor. Clients can claim money from stock exchanges only after a broker is officially declared a defaulter.

BSE in a release said it had received a SEBI letter dated November 13 to enhance the effectiveness of IPF as the regulator has decided to revamp the grievance redressal mechanism at stock exchanges with regard to clients of defaulting trading members ( TMs). The BSE said SEBI had asked it to implement the prescribed Standard Operating Procedure (SOP) for processing of investors’ claims and a timeline for declaration of defaulters.

It has also asked the exchange to disseminate the policy for processing of the investor’s claims on its website along with FAQs for easy understanding of the investors. SEBI has further asked BSE to give adequate advance notice to the investors about amendment to the exchange policy for processing of investors’ claims.

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Published on November 17, 2020
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