To further strengthen the commodity market, Sebi on Monday issued a detailed framework on Investor Protection Fund (IPF), which can be used for investor education and awareness programmes.
Spelling out detailed guidelines of constitution and management of IPF, contribution to the Fund and eligibility of claims, Sebi asked exchanges to ensure that the funds in the IPF are well segregated from that of the bourse and that the IPF is immune from any liability of the exchange.
All the penalties levied and collected by the commodity exchanges, except for the settlement related fines including penalties from delivery default, would be part of the IPF. Besides, one per cent of the turnover fee charged by the exchanges from the brokers or Rs 25 lakh whichever is lower in a financial year would go to IPF.
Sebi has started regulating the commodity market after the merger of Forward Markets Commission (FMC) with it in September last year. This circular is being issued to consolidate and update such norms prescribed for commodity bourses by erstwhile FMC.
Sebi said that IPF would be administered by a Trust created for this purpose. The Trust would comprise two eminent persons, exchange's MD and CEO and its one independent director (these names will be suggested by the bourse and approved by Sebi).
The bourses would have to disclose in their financial statements, the IPF trust as a related party as well as the details of transactions between the respective exchanges and IPF trust as per new accounting standards.
With regard to filing of claims, Sebi said that exchanges would have to publish a notice inviting legitimate claimants to file claims against the defaulter member within 90 days.