The government said on Friday an Investor Protection Fund is proposed to be set up with amounts collected by the market regulator Securities and Exchange Board of India by way of fines and penalties.
Currently, fines and penalties collected by Sebi are credited to the Consolidated Fund of India as required under Securities Contracts (Regulations) Act, 1956, the Sebi Act, 1992 and the Depositories Act, 1996, Finance Minister P Chidambaram told the Lok Sabha in a written reply.
The IPF can be established after the relevant laws are amended, permitting credit of these amounts to the IPF, he said.
While the broad objective of the IPF would be protection of investors in securities, the specific objectives would be determined in consultation with Sebi, the finance minister said.
The Investor Education and Protection Fund is set up under the Companies Act and is administered by the company affairs ministry, while IPF is proposed to be set up under the aegis of Sebi under the security laws, he said.
No budgetary allocation has been made for IPF so far as it is to be set up with amounts collected by Sebi by way of fines and penalties, he said. The IPF was proposed in the Budget 2006-07.
Attaching of brands: In reply to another question, Chidambaram denied that banks are insisting on attaching the brands of defaulting organisations alongwith the secured assets.
However, the bank concerned may take steps to attach the brands of the defaulting borrower if its value is significant compared to the outstanding dues of the borrower and the primary/collateral security available with the bank.