How Safe Are Funds and Securities with a Stockbroker?

Post Date : December 16, 2024

Introduction

The security of funds and holdings entrusted to a stockbroker is a primary concern for every investor. Regulatory frameworks in India ensure stringent measures are in place to safeguard client assets. Here’s an overview of how your funds and securities are protected.

Securities Safety

In India, securities are stored electronically in either of two depositories:

• CDSL (Central Depository Services Limited)
• NSDL (National Securities Depository Limited)

Stockbrokers operate as depository participants (DPs), acting as intermediaries for these depositories.

Key Safeguards for Securities

• Independent Custody: Your holdings are kept with the depositories, not directly with the stockbroker. This ensures that even if the stockbroker defaults, your securities remain safe.

• Transferability: In case of default, you can transfer your holdings to another broker.

Funds Safety

Funds deposited with stockbrokers for trading purposes are protected by regulatory requirements.

For more information, refer to this SEBI’s Circular (WEB)  detailing the eligibility criteria for compensation claims.