How your money is held and protected with Paasa
When you invest with Paasa, your money and assets are held in your own name, segregated from the broker's funds, and backed by SIPC and excess SIPC, so a broker or custodian failure does not mean losing what you own.
Paasa's underlying broker and custodian is Interactive Brokers (IBKR). Your cash and your investments sit in your own brokerage account, in your own name, not pooled with anyone else's money.
Several independent layers protect that account, and which ones apply depends on what you hold.
This blog covers where your assets sit, how they are kept separate, what SIPC and excess SIPC cover, the additional protection on UCITS ETFs, and what none of it covers.
Where does your money actually sit?
Your money sits in an account that belongs to you, held with Paasa's custodian.
Every position and cash balance in it is yours, held in your name. Funds move from your Indian bank under LRS straight into your account.
How are your assets kept separate?
Your assets are held separately from any institution's own funds, and that segregation is reconciled daily. Your cash and securities stay identifiable as yours at all times.
If the custodian ever fails, segregated client assets are meant to be returned to you or moved to another broker, not used to pay its creditors.
Note: Segregation and insurance are different things. Segregation means the assets are legally yours and held apart from the broker's money. Insurance is a backstop if something still goes wrong. You have both.
What is SIPC, and what does it cover?
SIPC, the Securities Investor Protection Corporation, protects customers of US broker-dealers if the broker fails. Your account sits with a SIPC member.
It covers up to $500,000 per customer, including $250,000 in cash. Protection is based on your account with the broker, not your residency, so it applies to Indian residents.
SIPC protects against the failure of the broker, not against your investments losing value.
How are your direct stocks protected?
Your direct US stocks sit in your account with the full broker protection stack.
On top of SIPC, your account also sits under an excess SIPC policy with Lloyd's of London, which adds coverage per account.
| Protection | Coverage | Cash sublimit |
|---|---|---|
| SIPC | Up to $500,000 per customer | $250,000 |
| IBKR excess SIPC (Lloyd's of London) | Up to an additional $30 million per account | $900,000 |
| Total | Up to $30.5 million per account | subject to a $150 million aggregate limit |
How are your UCITS ETFs protected?
UCITS ETFs get the broker protection above, plus a second layer that direct stocks do not have.
Layer one: the ETF units in your account are held in your name, segregated and covered by SIPC and excess SIPC like any other security.
Layer two: the stocks inside the fund are held by an independent depositary regulated by the Central Bank of Ireland and ring-fenced from the fund manager. If the fund provider became insolvent, its creditors could not touch those assets, because they belong to the fund's investors. Under UCITS V, the depositary carries strict liability for assets in its custody.
What does this protection not cover?
It does not cover market losses.
Every layer here, segregation, SIPC, excess SIPC, and the UCITS depositary structure, protects against failure and missing assets. None of it protects against the price of your stocks or ETFs falling.
Note: Market risk is the one risk no insurance scheme covers. These protections exist so that the only thing you are exposed to is the market, not the broker, the platform, or the fund provider.
What happens if the custodian fails?
Your assets are segregated and identifiable as yours, so they are transferred to another broker or returned to you. If anything were missing, SIPC and excess SIPC cover it up to the limits above.
Paasa's custodian is also capitalised well above its regulatory requirement, which makes failure a remote scenario to begin with.
What happens if Paasa shuts down?
In the unlikely event that Paasa ceases operations, your assets stay where they are, in your name. Custody sits with the custodian, so a Paasa shutdown leaves your holdings untouched.
The full picture at a glance
| What you hold | Who holds it | What protects it | Against what |
|---|---|---|---|
| Cash | Your name, at Paasa's custodian | Daily segregation, SIPC, excess SIPC | Broker failure |
| Direct stocks | Your name, at Paasa's custodian | Segregation, SIPC up to $500k, excess SIPC up to $30m | Broker failure |
| UCITS ETF units | Your name, at Paasa's custodian | Segregation, SIPC, excess SIPC | Broker failure |
| Assets inside a UCITS ETF | Independent depositary, EU regulated | Ring-fencing under UCITS rules | Fund provider failure |
About Paasa
Paasa is a global investing platform for Indian investors buying US stocks and UCITS ETFs. Every holding sits with Paasa's custodian, Interactive Brokers, in your own name.
Your account carries broker-level protection through SIPC and excess SIPC, and UCITS ETFs add a depositary layer on top of that.
The account belongs to you, so you can view your holdings and, if you ever stop using Paasa, operate it directly.
