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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Market Participants in the Securities Market

A trading member's client defaults and the member is unable to meet its obligation to the clearing corporation. Which fund maintained by the exchange or clearing corporation is intended to compensate investors who lose money because of a member's default, up to prescribed limits?

The Investor Protection Fund is meant to compensate genuine investors who suffer losses due to a defaulting or expelled trading member, subject to prescribed limits. The Core Settlement Guarantee Fund instead supports the clearing corporation's settlement guarantee to ensure trades are completed.

  1. AInvestor Protection FundCorrect
  2. BCore Settlement Guarantee Fund
  3. CCorporate Social Responsibility fund
  4. DEmployees provident fund of the broker

Explanation

The Investor Protection Fund compensates genuine investors for losses from a defaulting or expelled member, within limits. The Core Settlement Guarantee Fund backs the clearing corporation's settlement guarantee and covers member default in settlement, not direct investor compensation, so it is the key distractor.

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