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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market

Which of the following is a function of a stock exchange's Investor Protection Fund (IPF) in the Indian securities market?

The Investor Protection Fund compensates investors, up to a prescribed limit, when a defaulting trading member's assets are not enough to pay their legitimate claims. It is not used for price bands, membership admission or underwriting issues.

  1. ATo compensate investors up to a prescribed limit when a defaulter trading member's assets are insufficientCorrect
  2. BTo fix the daily price band for every listed security
  3. CTo grant trading membership to brokers
  4. DTo underwrite the public issues of listed companies

Explanation

The Investor Protection Fund is maintained by each exchange to compensate investors of a defaulting or expelled member, up to prescribed limits, when the member's assets fall short. Price bands are set by the exchange's surveillance and risk framework, membership is granted by the exchange under SEBI rules, and underwriting is done by merchant bankers or underwriters.

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