The Securities and Exchange Board of India (SEBI) has revised the rules governing Investor Protection Funds (IPFs), allowing depositories to use up to five percent of the annual interest or income earned from IPF investments to meet administrative and statutory expenses.
Under the new framework, at least 95 percent of the annual income generated from IPF investments must continue to be transferred back to the fund to strengthen its corpus. The remaining five percent may be used to cover expenses such as employee costs for dedicated IPF trusts, audit fees, taxes, charity commissioner fees, and other administrative charges.
According to SEBI, the decision was taken following representations from depositories and recommendations made by the Secondary Market Advisory Committee. The regulator said the move aims to ensure greater uniformity and consistency in the management of Investor Protection Funds across depositories and stock exchanges.
SEBI clarified that if administrative expenses exceed the permitted five percent limit, the additional amount will have to be borne by the respective depository. Any unutilised portion of the five percent allocation must be transferred back to the IPF corpus within the same financial year.
The revised framework will come into effect from September 1, 2026. Depositories have been directed to update their systems and amend relevant by-laws, rules, and regulations to comply with the new norms.
(Agencies)
