Sebi eases rules on use of depository investor protection fund income

Sebi has relaxed norms on how depositories can use income earned from their Investor Protection Fund, allowing them to spend a small part of the annual income on administrative and statutory expenses. The regulator said that at least 95% of the interest or income earned every year from investments made out of the Investor Protection Fund must be added back to the fund. The remaining amount, capped at 5%, can be used to meet expenses linked to the fund’s operations. The new norms will come into effect from September 1, 2026.

The change modifies the earlier rule under SEBI’s master circular for depositories, which required 100% of the interest or income earned from the Investor Protection Fund to be treated as part of the fund corpus. SEBI said it reviewed the rule after receiving representations from depositories and to bring consistency between the rules for depositories and stock exchanges.

The proposal was discussed by Sebi's Secondary Market Advisory Committee. The final decision was taken after considering the panel’s recommendations, comments received through public consultation and internal deliberations.


Under the revised framework, depositories will be allowed to use up to 5% of the annual interest or income from the fund’s investments to meet expenses related to dedicated employees of the Investor Protection Fund Trust. The amount can also be used for administrative and statutory expenses such as applicable taxes, audit fees and charity commissioner’s fees.

Sebi has also added safeguards. If expenses exceed the 5% limit, the additional cost will have to be borne by the depository. If the permitted amount is not used in the same financial year, it must be added back to the Investor Protection Fund.

The Investor Protection Fund is maintained by market infrastructure institutions to protect investor interests and support investor-related activities. The latest change gives depositories limited flexibility to meet the operating cost of the fund while ensuring that most of the income continues to strengthen the corpus.

Sebi has directed market infrastructure institutions to put in place the necessary systems for implementation. They have also been asked to make changes to relevant bye-laws, rules and regulations wherever required.

Depositories will have to bring the circular to the notice of market participants, including investors, and publish it on their websites.