Invest in US Stocks from India | How Safe is it?

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Invest in US Stocks

With advanced information and awareness about global investment benefits, Indian investors are taking steps for investment globally. Reserve Bank of India’s Liberalised Remittance Scheme has boosted the path to remit funds for investment outside India. Under this scheme, any individual either minor or adult can remit funds globally up to $250,000. Among all developed stock markets, the US stock market has occupied a significant space among Indian investors.

It is important to know before infusing a single dollar in the market whether investing in the US stock market is safe for Indian investors. To acknowledge the safety of funds in the US market, one should recognize various entities involved in investment, regulatory systems for investment transactions in the market, and different rules and regulations regarding investment from India.

Entities involved in trading in US stocks from India:

In India, various regulatory entities supervise and control the stock market transactions. In the case of foreign investors and domestic investors, the Securities and Exchange Board of India (SEBI) inspects the investment transactions in stock exchanges of India. Just like India, the US stock markets, also regulated under multiple regulatory entities. Before getting to know these regulatory bodies, firstly, you should understand some entities that participate in the investment.

  • Broker-dealers in the US stock market
  • Custodian of securities
  • Overseas banks

Broker-Dealer: A pathway for investment 

The broker-dealer is the first entity with whom an investor encounters for investment and trade in the US stock market. Like Indian brokers, globally established broker-dealers initiate the investment in the US stocks from India. These international broker-dealers generally have two types such as Independent BD and Wirehouse BD. Every broker deals in the market on behalf of clients who are investors from India. The Securities and exchange commission monitors every activity of these brokers.

Custodians for securities:

In the US stock market, various custodian firms and corporations digitally hold the securities of investors (domestic US investors and foreign investors) in the name of broker-dealers. These custodians digitally keep the securities of investors and prevent them from any damage and theft. JP Morgan, Citigroup, and Bank of New York Mellon are among the top custodians in the USA that ensure the safety of securities.

Overseas banks for investing funds from India to US stock market:

Banks are significant players in boosting investment. Every transaction in global financial markets is supported by these overseas banks. These entities transfer the funds between investors’ accounts from one country to another.

These are prime entities that assist Indian investors to trade in the US market stocks. Multiple bodies of the regulatory system in the USA, prevent the interest of international and domestic investors of the US. 

Regulation system in the US stock market for the safeguard of Indian investor’s investment:

The investment activities in the stock market regulate through the following acts and institutions:

  • Securities and Exchange Commission:

The Securities and Exchange Commission regulates all the broker-dealer in the US under the Securities Exchange Act, 1934. SEC emphasizes the protection of investors’ interests. Every investor’s account held with any custodian bank and broker is strictly protected under the norms of this entity. It has specified a list of rules and regulations that ensure the safeguard for the funds invested by international investors including the Indian investors.

  • Securities Investor Protection Corporation (SIPC):

The SIPC was established under the Securities Investor Protection Act to protect every investor’s account in the US stock market in the form of a non-profit corporation. SIP act has been created for the safety of securities and investment funds of investors under which SIPC specifies rules and regulations for the protection of investors (domestic along with all international investors).

Under SIPA, the SIPC expedited the return of securities and cash in case of broker-dealer failure It ensures the return limit for cash up to $250,000 and for securities up to $500,000. Investors can apply for additional settlements of up to $500,000.

Conclusion:

Like every investor, Indian investors’ funds are protected in the US stock market under the regulation acts and bodies. Various governmental and non-profit corporations set out multiple rules for the proper welfare and security of Indian investors and other international investors’ interest and funds. These endeavors of the US system have boosted the investment and trading in the US stocks from India.

Also read:- Features And Benefits Of Margin Trading In Share Market