Stockbrokers are all over the place in 2020 and everyone claims to offer seamless services. But in the growing world of businesses, the idea of a con is not new too. What if the stockbroker helping you buy and sell stocks goes bust or goes out of business. Will that affect your shares and stock balance in your demat account? What can you do about it as an investor?

In case you are also wondering about what happens if your stockbroker goes out of business, we have got you covered.

When Stockbroker Goes Out Of Business...

If your stock market broker goes bust in India, practically speaking, nothing happens to your stocks and shares. The stockbroking industry is very well under regulations and compliances laid down by SEBI. Unfortunately, the concern is your trading account and not your shares and stocks.

So what can you do in such cases? Go through the following checkpoints put in place for you as an investor:

• There is something called as Investor Protection Fund which is set up by SEBI to provide compensation to investors, in such cases. All you have to do is claim compensation in time. You have to file the claim within three years to be eligible for compensation.
• SEBI has put down strict rules for becoming a stockbroker in India. To remain a stockbroker there is a huge entrance cost which needs to be paid, strict disclosures at the discretion of SEBI, regular audits and inspection. Also, if the money in stockbrokers trading account is unused for three months, he/she shall not be able to use it further.
• Your stockbroker cannot complete transactions on your demat account without your prior confirmation. Keep a close eye on the transactions in case of any doubts.
• You can ask for your stock reports at any time of the year, and your stockbroker is obliged to give it to you.

These are a few things in place to keep you safe from forgery or frauds in name of stock markets. Let us see a few instances in the past.

Back in 2015, SEBI sacked Kassa Finvest for misutilisation of investor funds. There was a large group of people who complained for the non-receipt of funds and securities worth 38 crores.

Here is a list of expelled members and defaulters:

How To Write A Compliant Against Stockbroker To SEBI?

If you do not get a relevant solution in time for any kind of unusual activities on your account, you should send a written complaint to SEBI:

• Non-issuance of documents by stockbroker
• Non-receipt of funds/securities/margins/securities
• Non-receipt of corporate bond
• Auction value/ closeout value received or paid

There are many others too that can help you write a complaint for your particular issue.

Things You Should Take Care Of

• Check the membership license numbers of your stockbroker with different exchanges.
• Go through the documentation well, and untick power of attorney so you do not give any consent to your stockbroker.
• Do not say YES to all trading calls, verify and think twice before you say yes.

We are sure this blog might have helped you in understanding a little more about stockbroker going bust, and what you could do in such cases.