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

Which of the following is a function of the Investor Protection Fund (IPF) maintained by a stock exchange?

The Investor Protection Fund compensates eligible investors, up to prescribed limits, when a defaulting or expelled member's assets are not enough to meet their legitimate claims. It does not pay brokerage, provide margin funding, or guarantee trading profits.

  1. ACompensating eligible investors up to a prescribed limit when a defaulting member's assets are insufficientCorrect
  2. BPaying brokerage to members on trades executed
  3. CFunding the margin requirements of all clients
  4. DGuaranteeing profits on trades executed by investors

Explanation

The IPF is maintained by exchanges to compensate genuine investors of a defaulter or expelled member, up to prescribed limits, when the member's own assets are inadequate. It does not pay brokerage, fund margins, or guarantee profits.

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