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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Investor Grievances and Arbitration

A client files a claim with the exchange against a trading member. The member has since been declared a defaulter and the client's claim arises from a trade on that exchange. Which statement about the Investor Protection Fund (IPF) is most accurate?

The Investor Protection Fund can compensate eligible clients of a defaulter member for claims that have been admitted, up to a maximum limit set by the exchange. It does not cover ordinary market losses, and claims are verified and capped rather than paid without limit.

  1. AThe IPF may compensate eligible clients of a defaulter member for admitted claims up to the limit specified by the exchangeCorrect
  2. BThe IPF compensates all market losses suffered due to price fall
  3. CThe IPF is used only to pay the exchange's employees
  4. DThe IPF pays unlimited amounts for any claim without verification

Explanation

The IPF is maintained by the exchange to compensate eligible investors whose claims against a defaulter or expelled member are admitted, subject to a per-claim ceiling set by the exchange. It does not cover market losses from price movements. Claims are verified and capped, and it is not for staff payments.

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