BEIJING, Sept. 28 (Xinhuanet) -- China's investor compensation fund is expected to be operational as of Sept. 29, the China Securities Regulatory Commission said Wednesday.

The commission, however, gave no information on the scale of the fund, which is officially known as China Securities Investor Compensation Co. It has been reported the initial registered capital of the fund stands at 10 billion yuan (about 1.2 billion US dollars).

The commission said in a press release the fund was designed to protect investors' legitimate interests, help boost their confidence about the country's financial system.

Quoting a leading official of the fund, the commission said the main sources of the funding for the fund include securities transaction fee charges on the stock markets, contribution from domestically registered securities firms, interest revenues from frozen capital in the process of stock and other securities issuance, revenues from securities firms, and donations from domestic institutions, organizations.

The fund was set up in accordance with the Regulation on Securities Compensation Fund issued by the commission in cooperation with the Ministry of Finance, the People's Bank of China, the country's central bank, following the approval of the Chinese Government.

The official said the fund will be used to offer compensation to investors according to law when related securities firms are closed or go bankrupt, which, otherwise, might endanger their legitimate interests.

China's central bank has reportedly offered billions of yuan in compensation for the financial losses arising from bankruptcy of securities firms in the past year in a bid to maintain stability on the securities market.

Analysts say the emergence of the fund is expected to free the central bank from covering the losses of those securities firms. Enditem