How to Protect Your Demat Account from Fraud

The internet has taken over almost all aspects of our lives. Be it ordering food or booking flight tickets, the internet has made everything simpler and convenient. This technology is not only limited to our pleasures but further extends to our daily necessities and essentials. Right from grocery to health essentials, everything can be found at your doorstep. Even your finances have been affected largely with newer and grander technological advancements that make banking effortless. Monetary transactions on your fingertips have eliminated the hassle of visiting the bank every now and then. Even investing in mutual funds and saving options like fixed deposits can be done from the comfort of your home. 

However, this rising dependency on cyber technology can turn into a huge liability. Along with this newfound ease comes the risk of fraud and hacking. Your privacy, finances, and other data is susceptible to such threats. Just like bank and social media accounts, your demat account can also be hacked. Yes! you heard that right! The account, which is mandatorily required to hold bonds, ETFS, and other securities, is also prone to the risk of fraud. You might ask if that is the case how safe can a demat account be? 

How safe is your demat account?

Safety is an extremely crucial factor in your life. Even more so when it comes to your investments and finances. Hence, we are sure this question has popped into your head at least once. Are demat accounts safe? To answer your question, yes and no. 

The depository participant with whom you choose to open your account is usually affiliated with either the National Securities Depositories Ltd. (NSDL) or Central Securities Depositories Ltd. (CDSL). Both the bodies are supervised and supported by the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Moreover, this entire network is looked after by the central regulatory body, the Securities and Exchange Board of India (SEBI). This ensures that your demat account is secure and simplifies your equity trading activities. 

The chances of your demat account being subjected to frauds are slim due to close monitoring and strict regulations implemented by SEBI. So, it is safe to open a demat account, however, taking extra precautions is definitely advisable.  

These are some ways to make sure that your account remains secure:

1. Secure your DIS book

The Debit Instruction Slip (DIS) booklet is similar to a bank chequebook. You are required to sign your DIS in order to trade any share via your demat account. It is essential to look after your signed DIS booklet as anyone could use to transfer all your assets and money to another account! Avoid leaving it with your broker to safeguard yourself against any fraudulent activity. 

2. Safe keep your login information

You are provided with login information to access and use your demat account just like any other social media account. Be warned! These details in the wrong hands can lead to massive loss. Memorising this information instead of noting it down is one effective way to keep it safe.  

3. Protect with a powerful password

Demat accounts come with unique passwords, which should be protected at all costs. You also have the authority to change it and make it as unique as possible. This password is the key to all your treasured securities and stocks. Hence having a password, which is not so easy to crack, is essential to restrict any fraudster from accessing your account. 

4. Track your account statements 

Staying vigilant is the key to keeping your money protected. Keeping track of your account statements is important to ensure that that you haven’t been cheated of your money. Make sure to carefully review the SMS and trading account statements sent to you by the depository. Compare these with the trading activity done via your account to confirm that there are no anomalies in the transactions. Ensure that your mobile number and email IDs are updated with the depository to keep getting these notifications regularly. If you do not update your data, your old contact number may keep receiving these messages, possibly falling into the wrong hands. Such minute details can help tighten the security of your account and protect your funds from being misused by a third party. 

5. Reconsider signing the power of attorney with your broker 

Many times brokers might approach you, asking for a Power of Attorney (PoA) when opening a demat account. Don’t blindly sign it! Think it through. This document can give your brokers free reign to access and transact on your behalf. Be extremely cautious when handing over a PoA, as against popular belief it is not compulsory to do so. Even SEBI has affirmed that it is not mandatory to sign a PoA with your stockbroker. However, if you choose to do this, it is better to sign a limited purpose PoA, so your authorisation is required for every transaction. With this, stay in control of all your trading activities and manage your demat account efficiently. 

6. Freeze your account when travelling abroad or during inactivity

Are you travelling abroad? Don’t leave your account neglected. People tend to forget about their accounts when they do not trade their securities for extended periods of time. In this case, it is better to temporarily freeze it to ensure that your demat account is not misused by anyone else. Even when frozen, the account continues to receive bonuses, dividends and splits. Hence, make sure you use the freezing facility if your demat account has been left idle for an extended period of time.  

Are you a victim of a demat account fraud? Here’s what you can do:

1. In this tech-savvy world, the potential threat of hacking, phishing, and other fraudulent activity keeps rising. Your demat account may have also been affected by such incidents. Here are several steps you can take to secure your account in such an instance. Make a complaint on the official cyber-crime portal – https://cybercrime.gov.in/Webform/Crime_AuthoLogin.aspx   

2. Take a print of this online complaint and file an FIR at the nearest police station 

3. Change your login username and password immediately 

4. If you need to change your broker, contact the NSDL/CDSL to transfer your securities  

In this fast-advancing world, the crime scene is evolving as well. Make sure not to lose out on the multiple investment opportunities demat accounts have to offer out of fear of fraud. Follow the simple steps given above and trade safely with your account. Can’t wait to multiply your savings with mutual fund investments using your demat account? Well look no further! Here on Bajaj Markets find numerous options to invest your hard-earned money.