PART II CONTD- IMPERATIVE OF SPECIAL PROTECTION OF INVESTORS IN CAPITAL MARKET: SPECIAL INSOLVENCY LAW- THE ISA 2007 AND SEC REGULATIONS ON INTERMEDIARIES
Under the Special Law-
Distinction between assets of CMOs and account holders/investors dealing through the CMOs through the concept of segregation. see ss. 39 to 43 of the ISA 2007. see also R207A (8) on segregation of accounts by custodians; R207B (18) on segregation of accounts by market participants
S42 thereafter states the general rule subject to lawful claim and right of lien that money in trust account is not available for the payment of intermediary’s debt.
Protection of investors against insolvency of intermediaries through stringent requirement of capitalization for CMOs. See Rules 26, 27,207 and 226 (on custodian of securities and on Depository and other related parties as the case may be) of SEC Rules & Regulations.
Creation of Investors Protection Fund (IPF): a safety net for investors see Ss. 197, 198 and 204 in Part XIV of ISA 2007 (compare objectives of IPF with insurance role of NDIC for fund depositors in banks)