How to Safeguard Shares in Demat Account from Unauthorized Transfer | Motilal Oswal
How to Safeguard Shares in Demat Account from Unauthorized Transfer | Motilal Oswal

How To Save Your Shares In Demat Account

Well, you’ve finally gotten over to opening an online demat account of your own, haven’t you? Now that you own one, you need to know how to keep the shares in demat account safe from unauthorized access. This will help keep you safe from incidents like the recent Karvy Stock Broking scam, where the brokerage accessed the shares in demat accounts of its clients.

If you’re interested in knowing how to keep your account safe, then continue reading to find out.

1. Opt for the offline share transfer process:

If there’s one thing that you need to know about demat accounts, it is that you can opt for offline share transfers. You see, when you open an online demat account, you would be asked to sign a Power of Attorney (PoA) in favour of the stockbroker cum DP. What this essentially does is that it gives them the power to effect online share transfers on behalf of you, without explicit authorization for the same.

What many fail to realize is that this signing of the PoA is not mandatory and demat account holders can choose not to give such transfer rights to the DP. However, if you choose this option, then you will have to effect manual share transfers by way of signing a Delivery Instruction Slip (DIS) in favour of the buyer and submit the same to your DP each time you sell shares. Although it can be inconvenient and time consuming, opting for this option can help keep the shares in demat account protected from unauthorized access.      

2. Opt for password-based share transfers:

Here’s another thing about demat accounts that many individuals may not be in the know of. Both the depositories in india - the CDSL and NSDL offer password-based and PIN-based share transfers through their respective EASIEST and SPEED-e services. Under these two services, demat account holders get two options.

Under the first option, individuals can choose to set up trusted accounts and set up a PIN or password for authorizing share transfers to those accounts. Or alternatively, they can choose to use digital signatures to authorize share transfers to other non-trusted accounts. That said, here’s something that you should know. These benefits of demat accounts come at a cost that’s levied as an Annual Maintenance Charge (AMC).            

3. You could choose to freeze the account:

Another one of the major benefits of demat accounts is that you can choose to freeze an demat account temporarily for a period of time. This feature is useful for investors who don’t trade often. That’s not all. You also have complete control over this feature as you can even pick and choose the stocks that you would like to freeze temporarily.

Once the shares in demat accounts are frozen, no one can affect any transfers out of the account till it gets unfrozen. This feature gives you an extremely high level of protection from unauthorized access and transfers.

Conclusion 

And there you have it. These are the three primary ways in which you can keep your online demat account safe and protected.

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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