A Demat is holds financial securities like shares, bonds, stocks, so on, in an electronic form. Earlier traders had to exchange physical certificates of their shares. This was time-consuming and inconvenient.
A Demat account mitigates all the risks associated with trading in physical shares such as loss or theft. Although the possibilities of losses or fraud are considerably low due to the SEBI guidelines and vigilance, it is not non-existent.
There have been cases in the past that have caused the loss of significant amounts of money for traders and have put the aggrieved party through enormous hassle and stress. The article’s purpose is to enlighten you and tell you the ways through which you can ensure that your Demat account is safe. Let’s get started.
Cases of fraud related to Demat accounts have been on the rise in the past few years. There have been instances where brokers have transferred units to use them as collateral for margin funds on trade without the investors’ consent.
A recent case involving two large depository participants (DPs) aptly illustrates the point. SEBI imposed a penalty of Rs. 26 crores and Rs. 3 crores on two such DPs over their involvement in the fraudulent transfer of units from their clients’ accounts.
Make sure that the securities are transferred to your account on time by keeping a record of your account statements.
Your Demat account’s statement gives you a 360-degree view of all share credits and debits that take place in your account during a particular period and allows you to reconcile the activities taking place in your account with actual records. If it doesn’t, it’s a red flag, and you must immediately get in touch with your broker.
This is another way to keep your Demat account safe. Whenever you buy stocks or other financial securities, they are credited into your Demat account within two days of making the trade.
If it doesn’t get in touch with your broker immediately to confirm as to when your transaction will be completed and always follow up.
Traders often ask DPs to hold their shares in a pooled account to avoid paying extra transactional charges. You should avoid keeping your shares in such pooled accounts unless you understand the risks that come with it.
Make sure that you get the shares credited to your Demat account first. It would prevent the unauthorised transaction of your shares.
To maintain the customers' Demat accounts, brokers levy various charges. These include the sell transaction charges, annual account maintenance fees, so on.
Thus, it is advisable to avoid holding multiple Demat accounts. Charges are directly proportional to the number of accounts you have. In other words, the costs of maintenance can also increase with every Demat account you hold.
The Debit Instruction Slip (DIS) booklet of your Demat account is akin to the cheque book of your bank. When you transfer shares from your Demat account into another account, you need to sign the DIS.
Hence, you must ensure that you never leave your DIS booklet lying around or leave your signed DIS booklet with your broker to ensure your Demat account is safe.
If you happen to change your registered address, phone number, email ID, or any other details, inform your broker immediately and get them updated.
Updating your personal information will not take up much time and, it intimates you about any unauthorised transactions taking place in your account on the go.
If you go abroad or cannot use your account for some reason, you should ask your broker to freeze your account temporarily.
There will be no transaction on your Demat account during this period, but corporate actions like bonuses, dividends, so on, will continue as usual. It ensures the safety of your holdings in your absence.
Opening a Demat account online is simple and convenient. There are a few steps to follow and, you need to keep certain personal documents ready to complete the procedure. Here is a step-by-step guide to open a Demat account online:
Even though Demat accounts have revolutionised trading and investing, you, as an investor, must take steps to ensure that your holdings are safe. The regulations put in place by SEBI are designed to safeguard your interests as an investor. But you must still be cautious and vigilant about your regular trade practices.
Open an online Demat account with us and trade in a range of securities.