Mumbai, (IANS) Securities markets regulator SEBI on Tuesday mandated commodity exchanges to set up investor protection fund (IPF) and investor service fund (ISF) from July 1.
"The investor claim arising out of a default of a broker/member of the exchange shall be eligible for compensation from IPF," SEBI said in a circular.
"In case of claims against a defaulter member, the claims of the claimant shall be placed before the defaulters' committee for sanction and ratification. The defaulters' committee's advice with respect to legitimate claims shall be sent to IPF Trust for disbursement of the amount."
According to the securities markets regulator, the IPF Trust of the commodity exchanges shall have a maximum of five trustees.
"All the penalties levied and collected by the exchange, except for the settlement related penalties (including penalties from delivery default), shall be credited of the IPF. One per cent of the turnover fee charged by the exchange from its members/brokers or Rs 10 lakh which ever is higher in a financial year," the circular said.
The circular pointed out that if any claim arises within three years from the date of expiry of the specified period, such claim shall be considered eligible for compensation from IPF.
"The exchanges are free to fix suitable compensation limits, in consultation with IPF trust. However, the amount of compensation available against a single claim of an investor arising out of defaulter by a member broker shall not be less than Rs 1 lakh," the circular read.
"The compensation shall be disbursed to the investor from the IPF in case there is a shortage of defaulter broker's assets after its realization."
Besides, SEBI mandated commodity exchanges to set up ISF for providing basic minimum facilities at various Investor Service Centres (ISC).
"At initial stage, the exchange shall contribute a minimum of Rs 10 lakh towards setting up of ISF," the circular added.
"Subsequently, onwards, the exchanges shall transfer the one per cent of the turnover fees charged by the exchange from its members on monthly basis towards ISF within seven days of the end of the month, subject to minimum of Rs 10 lakh in a financial year."
"The exchange shall also plough back the entire income earned on the corpus of ISF to the ISF within one month from the end of September and March of each year."