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

A client's claim of Rs 4 lakh against a broker is pending. The broker defaulted and the exchange has declared it a defaulter. Which fund is primarily available to compensate eligible investors of such a defaulter, subject to limits?

The Investor Protection Fund of the exchange is the source for compensating eligible investor claims when a broker is declared a defaulter, subject to prescribed limits. The Settlement Guarantee Fund supports settlement obligations between members, not client claims.

  1. AInvestor Protection FundCorrect
  2. BSettlement Guarantee Fund used only for member pay-in shortfalls
  3. CCore SGF used to refund client brokerage
  4. DExchange's marketing fund

Explanation

The Investor Protection Fund of the exchange compensates eligible investor claims when a member is declared a defaulter, up to the prescribed limits. The Settlement Guarantee Fund covers settlement obligations among members, not client compensation. Marketing funds are unrelated.

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