Sebi allows 5% IPF income for expenses, eases operating norms

The Securities and Exchange Board of India has allowed depositories to use up to 5% of the interest or income earned from investments of the Investor Protection Fund (IPF) to meet the fund's operational and administrative expenses. The revised rule will come into effect from September 1, 2026.

The regulator issued the change through a circular amending its 2024 master circular for depositories. Under the revised framework, 95% of the interest or investment income generated by the IPF must continue to be added back to the fund's corpus, compared with the earlier requirement of 100%. SEBI said the remaining 5% can be used to meet expenses related to the functioning of the Investor Protection Fund. These include salaries of employees dedicated to managing the fund, administrative costs, statutory charges, taxes, audit fees and charity commissioner's fees.  The market regulator clarified that if the operational expenses exceed the permitted 5% limit, the additional cost must be borne by the depositories themselves and not from the Investor Protection Fund. It also said that any unused portion of the 5% earmarked for expenses must be transferred back to the fund's corpus.