Trading And Demat Account Safety Guidelines In India

Tech-savvy millennials are more attracted to the stock market as online demat and trading accounts have made the process seamless and convenient. More than 29 lakhs demat accounts are opened every month in FY 2022. Low technological know-how and financial literacy can leave many investors vulnerable to fraud and mismanagement. Therefore, they need to understand the safety of accounts and what they need to do and avoid to protect accounts.

Demat and trading accounts are two closely related accounts and are mandatory for online stock trading. A trading account is an interface between stock exchanges and traders to trade in different segments of the stock markets. A demat account can hold the shares, bonds, mutual funds, futures and options and other securities in the dematerialised form in a demat account and trade them using your trading account. 

The safety of accounts

• Stockbrokers registered with depositories, and the SEBI hold the securities securely in the demat accounts. These accounts are secured with log IDs and passwords set by the users. They use the latest technologies to safeguard accounts from cyber security threats.
• The SEBI keeps a hawk-eye on the transactions made through trading accounts and the debit credit of demat accounts to protect investors from frauds. They keep a check on brokers to save investors from financial irregularities.

Even though the investors’ securities are safe in the demat account, they should be vigilant about the safety steps. Solely relying on the regulating authorities is not a good practice. Investors need to be careful from their side also.

Here are the essential safety guidelines for trading India. It will help you take care of your demat account and trading account.

• Power of Attorney 

Investors should not give Power of Attorney (POA) to their stockbrokers. SEBI does not force the investors to submit the POA to the broker while opening brokerage accounts. Read all the clauses carefully while signing the terms and conditions of the broker to open demat and trading accounts.

• Debit Instruction Slip (DIS)

When investors need to transfer their shares from one demat account to another, they need a Debit Instruction Slip (DIS). Make sure you keep your DIS in a safe place. Avoid providing pre-signed slips to the stockbroker. 

• Never share your login credentials with anyone. 

No one can access your account until you share your log credential with someone. Keep it to yourself only to ensure safety.

• Do not fall for high return promises. 

Stock trading is not a magic wand to build a corpus and wealth generation. A promise of quick money is a scam. The stock market demands time to make legitimate money.

• Choose a SEBI-registered broker. 

You can ensure the safety of your demat and trading account with a broker registered with the SEBI. Choose a reputed broker in the industry.

• Do not leave funds in your trading account. 

Keep track of all the funds in your trading account. One should avoid keeping a large corpus in the trading account. The broker can misuse it. However, the SEBI has mandated for a broker to return their client’s money if they are not used for a specific time.

• Get updates with trading statements and SMS.

Investors should check the daily statements and messages sent by the authorities and brokers regarding their investments and trading transactions. Ensure your contact information is updated with the authorities and your stockbroker to keep receiving updates about transactions. 

• Demat freeze/de-freeze facility

You should use the freezing facility if you need to take a break from trading due to an important task or event that requires your attention and presence.

As an aware investor, you can ask your broker about the measures they have taken to ensure the digital security of your accounts.