Zerodha’s Nithin Kamath Discusses Key Investor Protection Measures In Pledging

At the Global Fintech Fest 2024, Nithin Kamath, Founder and CEO of Zerodha, discussed the dynamics of pledging and re-pledging securities while emphasizing measures to protect investor interests. He highlighted the importance of ensuring that shares remain securely in the customer’s demat account, pointing out that since 2020, regulations have strengthened this security. Prior to this, shares were transferred to brokers during pledging, exposing investors to risks. Kamath recounted an incident from 2019 when he realized how some companies, like Mindtree, viewed their largest shareholders differently, underscoring the potential risks associated with these transfers. Today, the system ensures that customer shares remain in their accounts even when pledging happens, offering greater security and transparency. Kamath noted that the onus of safeguarding these assets now falls largely on brokers, as they manage customer accounts while ensuring that securities stay protected. This shift has been beneficial for traders and investors alike, providing a safer environment for managing liquidity.