SEBI Modifies Guidelines for contribution to IPF and Investor Services Fund

The Securities and Exchange Board of India (SEBI) in its circular dated 30 May 2023 to the Stock Exchanges and Depository Participants, has announced modifications to the existing guidelines for the Investor Protection Fund (IPF) and Investor Services Fund (ISF). These changes aim to enhance investor protection measures and improve the management and utilization of these funds. The circular outlines the key provisions and contributions to IPF and ISF required from stock exchanges and depositories, as well as the deployment and disclosure requirements.


SEBI vide circular no. MRD/DoP/SE/Cir-38/2004 dated October 28, 2004, issued comprehensive guidelines for the Investor Protection Fund (IPF) to be maintained by stock exchanges. The purpose of the IPF is to provide a safety net for investors in case of default by trading members or other market intermediaries. The IPF is funded through contributions from the stock exchanges, which are required to allocate a portion of their annual profits towards the fund.

Establishment and Administration of IPF and ISF:

Under the revised guidelines, all stock exchanges and depositories are mandated to establish separate trusts for the IPF and ISF. These funds will be administered through these trusts, ensuring clear segregation of funds and immunity from liabilities. The utilization and oversight of the IPF and ISF will be the responsibility of the respective trusts.

Contributions to IPF by Stock Exchange:

The circular specifies various contributions that stock exchanges need to make to the IPF. These include 1% of listing fees received on a quarterly basis, interest earned on security deposits during public offerings, penalties collected from trading members for deficiencies and defaults, penalties collected from listed companies for non-compliance, and more. These contributions aim to build a robust corpus to safeguard investors’ interests.

Contributions to IPF of Depository:

The circular also outlines the contributions that depositories need to make to the IPF. These include 5% of their profits from depository operations annually, fines and penalties recovered from depository participants and other users, interest or income received from IPF investments, and transfer of funds from various reserves of the depository. These contributions further strengthen the IPF and enhance investor protection in the depository ecosystem.

Utilization and Deployment of Funds:

The IPF funds of stock exchanges and depositories will be invested in approved instruments such as government securities and fixed deposits of scheduled banks. The investments will be diversified to mitigate risks, and an investment policy ensuring capital protection and liquidity will be formulated. The monthly balance and utilization of funds will be reported to SEBI for transparency and monitoring.

Timelines and Disclosures:

The circular establishes timelines and a standard operating procedure (SOP) for declaring defaults, processing investor claims, and reviewing claims from the IPF. Stock exchanges and depositories are required to disclose the IPF corpus, policy on processing investor claims, and compensation limits on their websites. They must also disseminate FAQs to aid investor understanding and provide notice before implementing any policy amendments.

Investor Services Fund:

The circular mandates that stock exchanges allocate at least 20% of listing fees to the ISF, which will be utilized to provide services to the investing public. The Regulatory Oversight Committee will supervise the contributions and utilization of the ISF corpus, ensuring effective management.


SEBI’s latest circular highlights its commitment to investor protection by modifying the guidelines for IPF and ISF. The strengthened provisions, contributions, utilization, and disclosures will enhance transparency, mitigate risks, and provide a safety net for investors in India’s securities market. These measures are expected to foster investor confidence and promote a secure and thriving investment ecosystem