SEBI allows depositories to use part of Investor Protection Fund income for expenses

Capital markets regulator Sebi on Tuesday relaxed the norms governing utilisation of interest or income earned from the Investor Protection Fund of depositories, allowing up to 5% of such income to be used for administrative and statutory expenses.Earlier, depositories were required to plough back 100% of the interest or income earned from investments made out of the IPF into the fund’s corpus.

Under the revised framework, at least 95% of the annual interest or income generated from Investor Protection Fund (IPF) investments must continue to be added back to the corpus, while a maximum of 5% can be utilised during the financial year to meet expenses related to dedicated IPF Trust employees, audit fees, applicable taxes, Charity Commissioner fees and other administrative and statutory expenses, Sebi said in its circular.
The regulator said the changes have been introduced after considering representations received from depositories.The proposal was also discussed by the Secondary Market Advisory Committee (SMAC), followed by a public consultation and internal deliberations.

The regulator said that if administrative and statutory expenses exceed the 5% limit, the excess amount will have to be borne by the concerned depository.

Further, any unutilised portion of the permissible 5% in a financial year must be ploughed back into the IPF.

The revised provisions, which will come into effect from September 1, are aimed at bringing uniformity and consistency in the utilisation of interest or income from IPFs across depositories and stock exchanges.