Whole shares can generally be moved to another eligible brokerage account, while fractional holdings may need to be sold. Investors also need to understand their protection if a platform or overseas broker fails
Indian investors buying US stocks through domestic investment apps can generally retain ownership of their holdings even if the Indian platform stops operating. However, transferring securities, recovering funds and resolving complaints depend on the arrangements between the platform, overseas broker and custodian.
Platforms such as Zerodha and Vested provide access to US equities through overseas brokerage or other global investment arrangements. Although these services simplify investing, the Indian app may not directly hold the underlying shares.
Sanjit Singh Paul, managing director of Modulor Global, said investors would not ordinarily lose ownership of properly held securities merely because an Indian platform shuts down. However, accessing the holdings could become difficult, depending on the account structure and the overseas intermediary involved.
How to transfer US shares
Investors may transfer eligible whole shares to another compatible US brokerage account, subject to the receiving broker’s approval, documentation requirements and applicable fees.
The US Automated Customer Account Transfer Service (ACATS), operated through the Depository Trust and Clearing Corporation framework, facilitates transfers between eligible financial institutions.
Fractional shares, such as half a share in a company, generally cannot be transferred through this system. Investors may have to sell the fractional portion and transfer the proceeds as cash.
The process may also be more complicated when securities are held in an omnibus account, where assets are pooled under an intermediary rather than maintained in an individual brokerage account.
What happens if a broker fails?
If an eligible US brokerage firm fails and customer assets are missing, the Securities Investor Protection Corporation (SIPC) may provide protection of up to $500,000 per customer, including a maximum of $250,000 for cash, subject to applicable conditions.
This protection does not cover losses caused by falling share prices. Investors should retain brokerage statements, trade confirmations, tax records and account agreements.
Where to raise complaints
Investors should first approach their Indian platform’s grievance officer. Complaints involving eligible SEBI-registered intermediaries can be escalated through SEBI’s SCORES portal at scores.gov.in.
For unresolved disputes involving overseas brokers, investors may approach the US Financial Industry Regulatory Authority (FINRA) or the Securities and Exchange Commission (SEC), depending on the nature of the complaint.
Those investing through India INX can also use the exchange’s prescribed grievance-redressal mechanism.
Investors should verify who holds their securities, whether they have direct access to the overseas brokerage account, and what transfer or withdrawal procedures apply before choosing an investment platform.
