How to protect your Demat Account from fraud?

Investors can keep all of their shares, bonds, equity traded funds, mutual funds, and other financial instruments in one location and sell or buy them with just a few clicks thanks to demat accounts, also known as dematerialized accounts. But with the convenience of an electronic Demat account , the chances of fraud also increase. Every year, we hear more and more news of Demat account fraud and the risks are particularly high for first-time investors who don’t know how to protect themselves.

In this blog, I am going to talk about some tips for protecting your Demat account against fraudulent activities. After all, if you are being an investor, then be a smart one.

1. Protect your login credentials

The first thing you need to make sure that you are using strong passwords which are not easily hackable. Don’t use a very plain and simple password. Also, you should try to always remember these passwords and not record them anywhere. Keep changing your passwords rather frequently. Avoid using public WiFi and other unsafe networks for accessing your account.

 2. Keep checking your account regularly and don’t forget about it.

Sometimes people open an account and forget about it conveniently. Even after moving abroad, people stop using their Demat accounts but rarely care to do anything about it. These types of careless actions set the ground for fraudulent mischief. But if you want to prevent it, then you need to contact your depository participant and ask them to freeze your account till your further requests to open it again. This step is very important if you are planning to not use your account for extended periods of time.

3. Maintain a proper record of your account statement

The number and email id which is registered with the account should be kept activated at all periods of time. You should keep a sharp eye on all emails and messages telling about the transactions from your account. It should completely synchronize with your trading activities and any anomaly should be strictly resolved at the same time by contacting the authorities.

4. Be careful with your debt instruction slips

You should carefully keep all your debt transaction slips locked in a box preferably so that they cannot be found by anyone else. And remember do not hand over your debt transaction slips to your broker for any sort of financial transaction.

5. Look into your brokerage firm beforehand

There are a lot of brokerage firms coming up daily and it can really be difficult to decide which of them are trustworthy. You should do a proper background check before hiring any brokerage firm to handle your Demat account activities. You should make sure that the firm is not involved in proprietary trading as this can cause a conflict of interest which will harm your personal interests. Look into all aspects of the firm like performance, history, clientele, and market credibility before finalizing one.

 6. Power of Attorney is important

A broker who is given the Power of Attorney can access your Demat account in online trading activities. And this greatly increases the chances of fraudulent activities in the country. But we advise you that the Power of Attorney you share with the broker should be limited. Because of this, the broker will not be able to buy or sell anything according to their wish and should need your permission every time. Power of Attorney can also be rescinded at any time without prior notice.

 7. Take care of Debt instruction Slip

Your Debt Instruction Slip is like your chequebook so you can clearly understand its importance. That is why you have to take special care of it at all times and don’t leave it in the hands of your broker or anyone else. You should also sign your DIS every time you are transferring your shares from one Demat account to another.

Some Parting Thoughts

Although Demat account frauds are very common but with the above-mentioned steps, you can take care of your account and not become a victim of fraudulent online activities. Keep these in mind to become a safe and smart investor.

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