🛡️ Who runs and polices the market: SEBI, exchanges, depositories and your complaint routes

🎯 In 30 seconds: SEBI is the market regulator. The exchanges (NSE, BSE) and depositories (NSDL, CDSL) police their own members day to day. The RBI covers banks, UPI and foreign exchange. Shares in your demat account are yours even if your broker collapses, and since 2023 your unused money is meant to sit with the clearing corporation, not the broker. If a broker is declared a defaulter, an exchange's Investor Protection Fund can pay admitted claims up to a cap. None of this protects you from losing money on a bad trade. When something goes wrong, complain to the firm first, then on SEBI's SCORES portal, then through SMART ODR.

Why the rules exist

Markets only work if strangers trust each other enough to trade. You are handing money to a broker you have never met, to buy shares from someone you will never know, in a company whose accounts you cannot audit yourself. Every rule in this chapter exists because, at some point, that trust was abused.

India learned this the hard way. SEBI became a statutory regulator in 1992, the same year the securities scam broke, in which bank money was diverted into shares and pushed prices to unreal levels. The scam showed why a regulator with real powers was needed, and those powers have been widened several times since. Later problems, including brokers misusing client shares and money, are why the rules on client funds were tightened between 2019 and 2024. Bubbles, scams and crashes tells those stories.

SEBI: the market regulator

The Securities and Exchange Board of India is a statutory body set up under the SEBI Act, 1992. Its job, in the words of the Act's opening line, is to protect the interests of investors in securities and to promote the development of, and regulate, the securities market.

In practice SEBI:

• Registers every stock broker, depository participant, mutual fund, investment adviser, research analyst, merchant banker and portfolio manager. If a firm is not registered for what it is doing, it should not be doing it.
• Writes the rules in regulations and circulars: how IPOs work, how much margin a trader needs, how brokers hold client money, what companies must disclose.
• Investigates and punishes: insider trading, price manipulation, fraud and mis-selling. It can impose penalties, ban people from the market and order them to give back unlawful gains.
• Runs investor services: the SCORES complaint portal, investor education and a toll-free helpline.

SEBI works under a few core laws, including the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. You do not need to read them, but it helps to know that the rules your broker follows come from somewhere specific.

Exchanges and depositories: the front line

SEBI cannot watch every trade. The market infrastructure institutions do much of the daily policing of their own members:

• Stock exchanges (NSE, BSE) inspect brokers, watch trading for manipulation, put risky stocks under extra surveillance (you will meet ASM and GSM lists in The rules every Indian trader runs into), handle complaints against brokers, run arbitration and maintain an Investor Protection Fund.
• Clearing corporations (NSE Clearing and BSE's clearing corporation) collect margin, hold the client money brokers pass up each day, and guarantee settlement.
• Depositories (NSDL, CDSL) keep the ownership records, oversee depository participants and send you consolidated account statements so you can check your holdings independently.

The rest of the map

A useful rule of thumb: if the problem is about shares, a broker or a mutual fund, it is SEBI's territory. If it is about your bank account, a UPI payment or a forex app, start with the RBI's channels.

If your broker fails: what is protected

Brokers do go out of business, and a few have failed while holding client assets. What happens depends on where your assets were sitting.

• Shares in your own demat account are recorded in your name at NSDL or CDSL. They are not the broker's property. If the broker shuts, you move them to a demat account with another depository participant.
• Shares bought but not yet credited now go straight from the clearing corporation to your demat account. SEBI made that direct payout mandatory in November 2024, which closed off a route by which brokers could hold client shares in their own pool accounts.
• Unused cash in your trading account is meant to be passed up to the clearing corporation every day, under SEBI's upstreaming rules in force since July 2023. That makes it much harder for a broker to spend client money, though not impossible for a fraud to happen in between.
• Money blocked in your own bank account through the UPI block mechanism never leaves your account unless a trade needs it.

The Investor Protection Fund: what it pays

When an exchange declares a broker a defaulter (or expels it), clients can file claims. Admitted claims are first paid from the defaulter's own assets. If those run short, the exchange's Investor Protection Fund pays the shortfall up to a cap.

At NSE, the cap is ₹35 lakh per investor per defaulting broker for brokers declared defaulter or expelled after 13 August 2024. It was ₹25 lakh for earlier cases (as of October 2026). BSE runs its own fund with its own limits, and the exchanges review the cap from time to time, so check the exchange's page when you need it.

Two things the fund does not do:

• It does not pay for market losses. If your shares fall from ₹1 lakh to ₹40,000, no fund anywhere gives you the ₹60,000 back.
• It does not pay for losses from unregistered operators, fake apps, tip groups or "dabba" brokers, because they were never members of an exchange in the first place.

Worked example: two clients at a failed broker

Hypothetical broker Rapid Shares Ltd is declared a defaulter in 2026. Two of its clients file claims.

Both keep the shares in their own demat accounts, which were never at risk. Anjali, who kept little cash with the broker, is made whole. Vikram, who left a very large balance, recovers almost all of it but loses ₹1 lakh above the cap, and waits months for the process. The lesson: do not leave large idle balances with any broker, and check your statements.

Check before you trust

Before you open an account, follow an adviser or pay for any "research", check registration:

1. Find the firm's SEBI registration number. Registered brokers, advisers and research analysts normally display it on their website and in their communications. If you cannot find it, treat that as a warning.
2. Search for it in the list of registered intermediaries on the SEBI website. Check the name, registration category and validity match exactly.
3. For brokers, also check the member list on the NSE or BSE website.
4. For anyone giving buy and sell recommendations for money, they need to be a SEBI-registered investment adviser or research analyst. A large following on social media is not a registration.

How to complain, in the right order

1. Write to the firm first. Use the broker's, depository participant's or company's grievance email, and keep the ticket number. Most problems (a wrong charge, a delayed payout, a missing corporate action) are fixed here.
2. SCORES. If you are not satisfied, lodge a complaint on SEBI's SCORES portal, generally within one year of the problem arising. The firm has 21 calendar days to resolve it and file an action taken report.
3. Two reviews. If you are unhappy with the firm's reply, you can ask for a review within 15 days. The "designated body" (usually the exchange or depository the firm belongs to) does the first review within 10 days. If that does not satisfy you either, SEBI takes up a second review. Missed deadlines escalate automatically to the next level.
4. SMART ODR. SEBI's online dispute resolution portal lets you take a dispute with a broker, depository participant, mutual fund, adviser and other regulated entities to conciliation and, if that fails, to online arbitration. Arbitration involves fees, so read the current schedule on the portal first.

SEBI's toll-free helpline numbers are 1800 266 7575 and 1800 22 7575, from 9 am to 6 pm on working days, in several Indian languages (as of the SCORES FAQ, October 2024).

For online fraud, fake apps and impersonation, also report to the police cybercrime channels. Scams and red flags lists how.

Try it

1. Find your broker's SEBI registration number on its website. Search for it in SEBI's list of registered intermediaries and check the name matches.
2. Find your broker on the NSE or BSE member list.
3. Open the SCORES website, read the FAQ section for investors, and note the categories you could complain under. You do not need to file anything.
4. Open the SMART ODR portal and find the list of ODR institutions and the fee schedule.
5. Look at your trading account's fund balance. Write down how much idle cash you keep with your broker and ask yourself whether it needs to be there.

Sources

• SEBI: Acts (SEBI Act 1992, SCRA 1956, Depositories Act 1996)
• SEBI: Registered intermediaries
• SEBI: SCORES FAQs (October 2024)
• SEBI Investor: SMART ODR
• NSE: Investor Protection Fund Trust
• Moneylife: NSE increases investor claim amount to ₹35 lakh (August 2024)
• SEBI: Upstreaming of clients' funds to clearing corporations (June 2023)
• Business Standard: SEBI mandates direct payout of securities to clients (June 2024)