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Prevent Unauthorized Demat Account Transactions

05 Jan 2023

When someone buys valuable valuables like gold or silver, they make sure they keep them safe in a locker. Similarly, your securities are precious assets that require the same level of protection in the event of a disaster. As a result, keeping your shares and securities in a demat account is safer and more secure than keeping them in physical form. Demat accounts not only provide traders with numerous benefits, but they are also a handy way to trade in the financial markets.

Importance of Keeping a Demat Account Safe

With the introduction of demat trading, a slew of issues that plagued physical share certificates have been eliminated. You keep your securities and shares in a demat account with depository participant and broker, and the entries are made in your name. However, because a demat account is similar to a bank account, it is subject to the same types of dangers as a bank account, such as processing problems and fraud.

By faking your signature, someone with access to the data of your demat account can trade your shares. However, with demat trading, it is impossible to do business without leaving a trail of statements. The point is that you can track the individual or company that fraudulently traded your stocks from your demat account. Remember that fixing the problems takes time, so you won't be able to sell the stock until the dispute is settled.

How Can Unauthorized Transactions Be Avoided?

Though such flaws are impossible to eliminate, you can lessen the likelihood of them destroying the value of assets. Let's look at how an investor might protect their demat account from fraudulent transactions.

  • Update your email address and phone number

The first step in preventing illegal transactions is to notify your depository participant and broker of any changes to your email address or mobile number. You will receive continuous notification and notifications of your transactions directly from the relevant exchange if you do so. Furthermore, at the end of the day, CDSL will send you a text message or an email with all credits, debits, and other important transactions in your demat account.

  • Security transaction

Request a transaction statement from your DP, which will detail any share outflows (debits) and inflows (credits) in your demat account. These transaction statements let you compare the trading activity that occurs in your demat account with your personal records, in addition to serving as legal evidence of your shareholdings with your DP.

  • Depositories should be contacted

Because they only receive a transaction statement every three months, inactive investors are especially susceptible to fraudulent activities. To meet a temporary need, unethical DPs can issue a debit and an identical credit in your demat account throughout that time period.

  • Freeze your depository account

Consider freezing your demat account for investors who don't want to take a break from investing. The main goal of this preventative step is to avoid unintentional share trading from your demat account. You must provide your DP formal instructions to halt the transfer of shares from your demat account until further notice.

Other Alternatives

Unauthorized transactions in a demat account can arise for a variety of reasons other than fraud. For example, your DP may enter your demat account data by mistake when completing a delivery instruction for another demat account user, and trade the shares from your demat account. The situation will be resolved because the DP made a mistake.

The only limitation of the freezing feature at the moment is that an investor cannot freeze individual stocks in their demat account; instead, they must freeze the entire account. This reduces the motivation for active investors to use this service because it adds an extra step to their transaction. The good news is that NSDL is in the midst of updating its software for DPs to include the ability to freeze specific stocks.

Wrapping Up

Incorporating these measures into your trading operations will go a long way toward ensuring that you spend your investing time attempting to make lucrative investments rather than attempting to address demat account abnormalities.

Visit Motilal Oswal to open a free demat account now!

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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