What happens if your broker goes broke?

I know there are rules protecting investors and traders. But I would like to know the time frame required for legal action and primarily getting your money back. I believe worst case scenarios should be part of any business plan. So for serious traders broker defaulting on payment should be also considered. I would like to know about rules and time frame required to solve the issue if this situation arises.

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The reasonable limitation period for CIVIL proceedings is 3 years.

The process would happen like this:

  1. You will file a complaint against your runaway broker with SEBI here: https://scores.gov.in/scores/Welcome.html

  2. The SEBI will start noticing similar complaints flowing in and start looking into the case.

  3. SEBI will organize a committee to collect all similar grievance and make arrangements for compensation from the Investor Protection Fund.

  4. The time frame within which you will be compensated from the Investor Protection Fund etc etc only time can prove.

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Must Read



@VM1 @nithin

I am sure Zerodha has a robust RMS in place… but the above episode does shake investor confidence…

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Checked their twitter handle. Seems like they are responding to investor complaints. So let us hope the issue is sorted out.

:smiley: I think they are just trying to play down the issues, in the same handle some of the payouts have been pending for more than fortnight…

we do not know the gravity of the situation and we do not know if the same is true or not as well…

Karvy is very big name in Broking and asset management industry. @nithin what are your views on it , I think the matter would be resolved soon as karvy is not new to business and are trusted from long time.

I hope this will be solved soon with no spillover effects. Once again it is proved that robust risk management plays a prominent role along with profitability of the member.

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Seems there is no issue and stopping of payouts is not related to mentioned rumor on above article.

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We were proved wrong … SEBI banned KBL …

Sebi bans it , nse found that it misused power of attorney and the amount of fraud is near about 2000 crore.
Also they can’t execute trades from their existing clients, don’t know wheather they are able to withdraw their funds or not.

They can execute trades of existing clients but only they can’t add new clients according to the sebi circular.

The payout pending days in karvy is 45 days , they didin payout any amount morethan one lakhs even the branch manger received a complaint from client manager forward the complaint to head office , but no proper response from HO , even manager don’t know whats happening in the company , thats sad ,

The Securities and Exchange Board of India (Sebi) banned Karvy Stock Broking Ltd (KSBL) over client defaults worth Rs 2,000 crore with immediate effect. It’s been banned from taking on new clients and executing trades for existing customers.
It is what is mentioned in economic times.

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Also the clients who executed equity trades in Friday or Thursday might have problem under t+2 settlement

If there is existing position it has to be closed other wise it can create much bigger problems, I believe only new clients are not allowed to be added.

Maybe they could be allowed to square of their existing positions but that is what is mentioned in financial news.

@siva below article mentions that even counterparty to karvy may have issues