How to Protect Demat Account from Fraud?

How to Protect Demat Account from Fraud?

The stock market can be a lucrative avenue for investors to grow their wealth, but it can also be a hotbed for fraudulent activities. In recent years, technology has enabled investors to participate in the stock market through Demat accounts, which allow them to hold securities electronically. However, this has also increased the risk of fraud and cyber-attacks. 

In India, Demat accounts have become a popular way to hold securities, but they are not immune to fraudulent activities. Protecting your Demat account is crucial to safeguarding your investments from potential fraud. Here are some tips on how to protect your Demat account from fraud in the Indian stock market.

Protect your Demat account from fraud in the Indian Stock Market

Securities regulators and brokerage firms constantly develop innovative ways to prevent fraudulent activities. Even so, as an account holder, you must also adhere to fundamental steps to protect your Demat account from hackers and avoid costly mistakes. The following guidelines can help you protect Demat account from hackers.

1. Always exercise caution and remember to maintain your Demat account

Some people conveniently forget to close their Demat account when they move abroad. You are at risk for hacking or other scams as a result of this thoughtless behaviour.

If you are moving and won't be using your Demat account for a while, it is always preferable to ask your depository participant to freeze it. As a result, access won't be given until you make another request.

2. Keep your login information protected

Ensure the security of your login details. The best course of action is to recall them rather than having them recorded. It's also a good idea to regularly change the login password.

3. Keep a strong password

There is a unique password for each Demat account that needs to be secured. Additionally, the password can be modified. Instead of using a plain and obvious password, use a strong one. Additionally, avoid accessing your Demat accounts using unsecured networks like free WiFi.

4. Keep a copy of all account statements

Apart from checking any statements and messages that the depository provides you attentively, make sure your email & phone number are up to date. You should examine all of the transactions in your Demat account to your trading activity and alert the depository right away if there are any discrepancies. Click here to know what is Demat Account Holding Statement.

5. Choose a reputable broker

Choosing a reputable broker is the first and foremost step to protect your Demat account. The Securities and Exchange Board of India (SEBI) regulates stockbrokers in India, and it is essential to ensure that the broker you are considering is registered with SEBI. You can check SEBI's website to verify if the broker is registered. In addition, do some research to ensure that the broker has a good reputation and track record of providing secure and reliable services. You can check online reviews and ratings to gauge the broker's reputation and reliability.

6. Power of Attorney

Demat accounts can be accessed by brokers who have signed PoA (Power of Attorney) agreements. The nation's expanding Demat-related frauds are seriously threatened by these POAs. A general-purpose agreement might have been used to transfer the sale of funds before the new rule, but it cannot be done now.

When you register a PoA with the broker, demand a restricted-purpose PoA. This is so that brokers can sell or transfer funds or securities without the investor's consent. Your safety is significantly increased by this process. The PoA may be terminated at any moment without prior warning, with the exception of unpaid dues. Click here to know more about poa in demat account.

7. Keep Your Debit Instruction Slip (DIS) Booklet Safe

The Debit Instruction Slip (DIS) booklet for the Demat account functions similarly to your bank cheque book. Before moving your shares across Demat accounts, you need to authorise the DIS. You must ensure that you never leave your approved DIS booklet with the broker or anyplace else in order to prevent fraud.

8. Regularly monitor your account

Regularly monitoring your Demat account is crucial to detect any unauthorised transactions or suspicious activity promptly. Check your account statements regularly to keep track of your holdings and transactions. It is also essential to report any suspicious activity to your broker or the relevant authorities immediately. If you notice any discrepancies in your account statement, such as unauthorised transactions or missing securities, report it to your broker or the Depository Participant (DP) immediately.

9. Watch out for phishing fraud

A frequent type of fraud involves fooling people into divulging their login details and other personal information. Hackers frequently employ social engineering techniques to give their victims phoney emails or communications that seem authentic. They might impersonate a well-known business or financial institution and use its name and emblem to dupe victims into providing their personal information. Any unsolicited emails or communications asking you to click a link or download a file should be avoided. Always double-check the communication's origin before responding or acting.

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Table of Content

  1. Protect your Demat account from fraud in the Indian Stock Market
  2. Is Demat Account Safe?

Is Demat Account Safe?

Due to all the rules and SEBI's close monitoring, there are very few chances of fraud in your Demat account. Therefore, opening a Demat account is safe. To provide additional safety, the SEBI has assured clients that no power of attorney is required with the stockbroker. However, as a user, it is your responsibility to take precautions to protect your Demat account from hackers.

The NSE and BSE support and oversee both depositories that are registered with Depository Participants. In addition, this ensures the security of your Demat account and makes trading in the stock market easy. 
Click here to know more about is demat account safe.

Conclusion

Safeguarding your Demat account requires following best practices that revolve around security, monitoring, and precautions. You can also regularly check your Demat account statements, monitor holdings, etc. Maintaining a minimum balance, avoiding speculative trades, and being aware of regulations also help. Any investor can keep their Demat account and holdings secure. Staying informed and proactive is key to protecting your investments in the Demat account.

FAQs on how to protect Demat account from fraud

Yes, you can frequently update the password on your Demat account to avoid unauthorised access.

You can regularly check the statement for your Demat account to make sure that all the transactions are valid and authorised. You should notify your broker or the depository participant as away if you discover any unauthorised transactions.

No one should ever have access to your Demat account login details, not even your friends and relatives. This information must remain confidential.

If you receive any suspicious emails or phone calls related to your Demat account, you should not share any information and immediately report it to your broker or the depository participant.

You can keep your computer and mobile device secure by installing antivirus software, setting strong passwords, updating your software periodically, and avoiding clicking on dodgy links or downloading dubious attachments.

If you suspect any fraud in your Demat account, you should immediately contact your broker or the depository participant and report it to the Securities and Exchange Board of India (SEBI).