Are you logging into SFTP as 'root'? That would allow access to everything. If you create another user and assign access rights to them and then SFTP using the new user it should work.
Wiggs,
I am logging as regular user (just changed FTP => SFTP).
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In FTP, folder Public is top accessible folder for user (i have created test user for this).
But in SFTP i can go into other folders above that folder (some with 777, some 775 some inaccesible).
I want only Public folder accesible for that user / group.
FTP access in web administration is for test user:
Path User/Group
Volume_1/public test