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

Which of the following is a primary function of the stock exchange's investor protection fund (IPF) maintained for the benefit of investors?

The investor protection fund compensates genuine investors, up to prescribed limits, when a member is declared a defaulter and its own assets are not enough to meet the claims. It does not fund trading, pay dividends or fix brokerage.

  1. ATo compensate investors up to prescribed limits when a defaulting member's assets are insufficientCorrect
  2. BTo fund the brokers' proprietary trading
  3. CTo pay dividends to listed company shareholders
  4. DTo set the brokerage rates charged by members

Explanation

The investor protection fund compensates genuine investor claims, up to limits set by the exchange, when a member defaults or is declared a defaulter and its assets are inadequate. It has no role in proprietary trading, dividends or fixing brokerage.

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