Expenditure from the Investor Education and Protection Fund (IEPF) dropped from ₹11.9 crore in FY23 to ₹2.8 crore in FY24, according to the annual report of the Securities and Exchange Board of India (Sebi) for 2023-24. That’s when the number of awareness drives and educational campaigns has increased.
The fund’s balance doubled from ₹240.2 crore at the close of FY23 to over ₹533 crore as of March 2024. Constituted by an executive order in 2007 and formalized under the Sebi (IPEF) Regulations, 2009, to serve investor interests, it started with just ₹10 crore.
This trend is mirrored at stock exchanges and depositories. Exchange protection funds, which pay out in the event of broker defaults, climbed to ₹2,793 crore by FY24 as spending declined. Depository-led investor protection funds also rose to ₹127 crore.
Outside cases of broker insolvency, direct returns to harmed individual investors remain rare. Compensation is only made after Sebi issues a public invitation for claims, and investors have up to seven years to apply with proof of direct loss. Only “eligible and identifiable” investors who can document their investment and the loss from the violation may be considered, and the ultimate decision lies squarely with the regulator. Above all, the payouts are discretionary, not mandatory.
“In practice, this makes it difficult for many investors to access the fund. Furthermore, proving a direct loss and establishing causality…means that actual restitution is a rare occurrence,” saidRavi Prakash, securities lawyer at Corporate Professionals. “While the law allows for it, the combination of Sebi’s discretion, documentary requirements, and procedural delays has meant that restitution is still the exception rather than the norm.”
The Investor Education Protection Fund Authority (IEPFA) is entrusted with the responsibility of the IEPF. Emails to IEPFA and Sebi went unanswered till press time.
Sumit Agrawal, founder of Regstreet Law and former Sebi officer, said, “Sebi maintains that it lacks the authority to identify, verify, or compensate affected investors, arguing that it is not a ‘Court’ empowered to adjudicate claims or award restitution.”
According to Agrawal, rare exceptions such as the Roopalben Nareshbhai Panchal initial public offering scam or the Sahara case were possible only when the Supreme Court or special committees intervened and directly authorized refunds to victims.
The Roopalben Panchal IPO scam highlighted both ambition and limits in enforcing restitution. Between 2003 and 2005, Panchal used over 14,000 fake demat accounts to corner shares across 16 IPOs—including Tata Consultancy Services Ltd and Yes Bank Ltd. Sebi identified over 1.2 million eligible beneficiaries and distributed over ₹23 crore by 2010, but some funds remained undistributed.
In the Sahara case, as of early 2025, only ₹2,025.75 crore has been disbursed to about 1.16 million depositors via the CRCS-Sahara Refund Portal out of a potential ₹5,000 crore transferred for that purpose.
Other cases, such as the Hindustan Unilever Brook Bond Mutual Fund insider trading matter, illustrate the long, uncertain journey that even obvious victims face trying to claim their due in India—the case remains stuck in litigation more than two decades after the alleged violation.
“How will you identify someone after 3-4 years of the scam, if and when Sebi would get the disgorged money?” asked. Abhiraj Arora, partner at Saraf & Partners. “For market-wide frauds or manipulation—often affecting thousands over years—by the time regulatory action concludes, identifying and quantifying the losses of each investor is a daunting—often impossible—task.”
India’s compensation mechanism, he said, is limited to instances of broker default. “For market-wide breaches, the system offers little hope of direct recovery… Sebi’s powers are primarily regulatory, not compensatory. The law does not mandate automatic restitution.”
Unlike in the US or the European Union, where regulatory authorities regularly compensate victims from disgorged sums, Indian investors watch from the sidelines as such money is typically routed to the IPEF for education and market-wide initiatives.
Jane Street deposit
On 3 July, the Sebi barred US-based Jane Street Group from trading in Indian securities, finding evidence of massive, systematic manipulation of the Nifty and Bank Nifty indices.
The quantitative trading firm was accused of deploying aggressive algorithmic strategies timed to expiry days, inflating or deflating index prices to benefit their derivatives book, and making net profits of over ₹36,500 crore in India between January 2023 and March 2025.
Sebi ordered the impounding of ₹4,840 crore worth of alleged illegal gains made by the firm. Indian retail investors reportedly suffered historic losses. Over ₹1.05 lakh crore was wiped out in derivatives trading in FY25 alone.
Even though investigation is underway, despite the magnitude of the case, the amount will be sent to Sebi’s IPEF or the Consolidated Fund of India, but may not reach the investors who lost in trades during the alleged index manipulation.
Experts have called for the introduction of a US-style mechanism—akin to the SEC’s Fair Fund—to transparently distribute disgorged gains to victims. “The Finance ministry and Sebi could consider adopting a dedicated restitution mechanism akin to the SEC’s Fair Fund in the US to pool and transparently distribute disgorged amounts to investors”, Agrawal said.
Legislative amendments to the Sebi Act, SCRA, and Depositories Act could embed a statutory right to compensation, clearer eligibility, and simpler processes, possibly through online dispute resolution platforms.
“Ultimately, the government needs to make legislative changes to create a statutory right to compensation for investors,” said Prakash of Corporate Professionals. “These changes could make sure that the IPEF fulfills its promise of protecting investors.”
