Q1. [2] § 4.2 Products in the Secondary Markets § 4.2.1 Equity Investment
Explain the following : Aim of Investor Protection Fund
Previously asked in CBSE board exam
2026 92 Q19 (a)
Generated by claude-sonnet-4-6 · 2026-06-15 07:06 · grounding rag
Model Answer
Investor Protection Fund (IPF):
The Investor Protection Fund is established by stock exchanges to compensate investors in case a trading member (broker) defaults in making payment or delivering securities to the investor. Its aim is to protect small investors from financial losses caused by broker default, thereby maintaining investor confidence in the securities market.
Explanation
- The key points examiners expect: who it protects (investors/small investors), against what (broker/trading member default — non-payment or non-delivery of securities), and purpose (maintain confidence in the market).
- Even though the source passages don't elaborate on IPF in detail, this is a standard NCERT/SEBI-prescribed concept from Chapter 4 of the Financial Markets textbook.
- Do not confuse IPF with SEBI's investor education initiatives — IPF specifically deals with compensation on broker default.
- For 2 marks, one clear definition + one aim/purpose sentence is sufficient.
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