How to Safeguard Against Demat Account Fraud?

It has been several years since the implementation of a Demat account in the stock market. The Demat account provides seamless and secure trading. To avoid fraud and loss of securities, online Demat came into existence.

Let’s consider an incident of a past fraud involving a big company. The company claimed that the broker had illegally transferred 344 crores worth of mutual fund units from the Demat accounts of its subsidiaries. This case further reveals that the transfer units of mutual funds are used for margin requirements on trades of its associated firms. According to the Securities and Exchange Board of India (SEBI) guidelines, this type of activity is dangerous and completely illegal.

Having a Demat account is a gateway to making your entry into the stock exchange. A Demat account lets you trade in shares, ETFs, gold bonds, and mutual funds. A Demat account is a place to safeguard all your financial holdings. Every trader, whether a professional trader or a beginner, needs to own a Demat account under his or her name. This account will link to your trading account and your bank account. So, when you buy any securities from the stock market, it will be directly reflected in your Demat account.

Share India holds your securities and safeguards and protects them with multiple layers of security.

Your Shares Are Safe With NSDL and CDSL. Don’t Worry

When you open an account with a depository like NSDL or CDSL, you can invest in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) markets through the two depositories. Apart from these facilities, you also get SEBI supervision on all the trading activities, ensuring transparent and credible trading in the Indian stock market. This guarantees the security of the holdings in your Demat account and makes it hassle-free to transfer funds across the stock market.

There is very little chance of becoming a victim of fraud with the online Demat account. But still, you have to be vigilant and protect your account from any misuse and unauthorised transactions. A depository participant like Share India offers a secure login and two-step authentication to protect your Demat account. The depository participants (DPs) are members of the major depository in India. To trade on a safe platform, you can consider a Share India brokerage partner for your investment in the share market.  Additionally, suppose you’re interested in learning how to efficiently transfer shares from one Demat account to another while ensuring maximum security and transparency. In that case, Share India provides valuable insights and resources to safeguard your investments and facilitate hassle-free transfers in the Indian stock market.

5 Strategies to Safeguard Your Demat Account Against Fraud

Be Alert About Any Unauthorised Access

Sometimes, when you enter your credentials, you need to be assured of the device and website on which you are entering your critical information. There are scams such as phishing which can risk your Demat account holdings. So, you need to be aware of your Demat account login and check if the trading activity is done by you or not.

Do Not Share Your Login Details

Be vigilant and do not make the mistake of keeping your credentials in an insecure place. It is advisable not to share your credentials on any of the social platforms with anyone. You must know that it’s required to keep a strong password and change it regularly as a security protocol. You also need to access your Demat account from a safe network to avoid using public or unsafe networks.

Maintain the Record of Your Transaction

You must cross-check the trading activity in your Demat account. You can check your email and SMS as the depository will share the statement of transactions on your registered mobile number and email ID. All the transactions displayed in your Demat account must match the documented statement you receive from the depository on your email ID. If you find any problem, it’s better to connect with your broker and secure your Demat account before it’s too late.

Check Your Broker

As the popularity of stock trading among the masses increases, so does the number of brokerage firms. But you need to remember that your brokerage firm must have a strong customer base, history, reputation, and credibility before opening a Demat account.

Update Your Mobile or Email ID

Your mobile number and email ID are important for accessing your Demat account. So, it is vital to update or add your mobile number and email ID. Do not use a mobile number or email that is not in use. Unauthorised access to the Demat account linked to your mobile and email ID can be detrimental to your holding and even cost you money.

To avoid such a situation, you can also use the freezing facility of the Demat account. Sometimes, when you take time off from the market and need a break for your personal life or need to focus on some other work, there is a feature to freeze your Demat account. When you freeze your Demat account, there will be no trading activity happening in your account. Even if your Demat account freezes, you can still receive the dividends, bonus, and share split. You will need to set the time for freezing your Demat account. Apart from that, AMC’s frozen account charge is also low. What’s more, you can simply unfreeze your Demat account without any loss or extra charges.

If You Are a Victim of Demat Account Fraud? Here’s What You Can Do

If you are a victim of Demat account fraud, there are the following things you can do in this situation:

1. Inform your depository participants about their registered email or number and tell your DPs about the potential fraud.
2. You also need to draft a written complaint about the fraud. The complaint will also go to the regulatory body in India, SEBI.
3. Provide the authorities with proper proof and incident report.
4. In case of a false login, you need to reset your password and update your PIN for the Demat account and other applications connected to it.
5. Recheck your account statement along with the Demat account statements carefully.
6. Take expert advice about the legal remedies and procedures to report the fraud.

Conclusion

Usage of online Demat accounts relatively lowers the risk of fraud or theft of financial securities. In this article, we have discussed how to safeguard against Demat account fraud. You must also remember that operating your Demat account is a crucial task, and so is online trading. As an informed trader, you need to avoid sharing your user ID and password with anyone. Keep your password different from your birthday, anniversary, or other important dates. Try to make a strong password mix using alphanumeric elements along with symbols. Also, remember to log out of any devices that are no longer accessible to you.

Frequently Asked Questions (FAQs)