NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services
Which of the following is a recognised mechanism under which an investor's claim against a defaulting trading member can be compensated from an exchange fund?
The Investor Protection Fund maintained by the exchange compensates investors, up to prescribed limits, when a trading member defaults. It is funded through exchange contributions and penalties. The other listed accounts are not recognised compensation mechanisms for investor claims.
- AInvestor Protection FundCorrect
- BConsumer welfare fund of the client's employer
- CBrokers' personal savings account
- DClearing member's dividend account
Explanation
Exchanges maintain an Investor Protection Fund, which compensates investors up to specified limits when a member defaults or is declared defaulter. The other options are not exchange compensation mechanisms.
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