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

A client's broker is declared a defaulter by the exchange and the client has a valid claim for funds. From which fund can the client seek compensation, subject to the prescribed limits?

The client can claim from the Investor Protection Fund maintained by the exchange, subject to prescribed limits, when a trading member is declared a defaulter. The Settlement Guarantee Fund protects settlement of trades and is not meant for investor compensation claims.

  1. AInvestor Protection FundCorrect
  2. BSettlement Guarantee Fund of a different exchange
  3. CBroker's own margin deposit only
  4. DCore SGF used for trade guarantee

Explanation

The Investor Protection Fund maintained by the exchange compensates eligible investors for valid claims when a trading member is declared a defaulter, up to prescribed limits. The Settlement Guarantee Fund backs settlement of trades between members, not investor claims, and a different exchange's fund has no connection with the claim.

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