Compensation

Compensation, in financial markets, refers to the financial remedy provided to an investor or market participant who has suffered a loss due to the wrongful actions of a regulated intermediary — a broker, depository participant, investment adviser, or other SEBI-registered entity. In India, compensation mechanisms for investor losses include: the Investor Protection Fund (IPF) at NSE and BSE — which compensates investors up to ₹25 lakh for losses caused by broker defaults including non-payment of sale proceeds, non-delivery of purchased securities, and unauthorised trading in client accounts; SEBI's SCORES grievance platform — through which investors can file complaints against intermediaries and seek resolution; and arbitration proceedings at exchanges — providing a faster, cheaper alternative to civil court litigation for securities-related disputes. For banking sector investor protection, DICGC insures deposits up to ₹5 lakh per depositor per bank in case of bank failure. In the corporate law context, compensation paid to shareholders during compulsory acquisition (such as open offers under the Takeover Code) must be at the regulated minimum price computed under SEBI's formula. Executive compensation — the remuneration paid to Key Managerial Personnel of listed companies — is disclosed in annual reports and must be approved by shareholders through an ordinary resolution for amounts above specified limits under the Companies Act, 2013, ensuring accountability to the investor community for executive pay decisions.