How to protect your trading and demat account?

The Indian capital market system, consisting of the regulators, the exchanges, the trading account and demat account have their own internal checks and balances. Here is how you can protect your trading account and your demat account.

Dec 10, 2019 10:12 IST India Infoline News Service

In the last few days, many small and medium sized investors have been plagued with two questions foremost in their minds:
  1. Are my shares safe in my demat account?
  2. Will my broker pay me my money on time when I sell shares?
The Indian capital market system, consisting of the regulators, the exchanges, the trading account and demat account have their own internal checks and balances. These ensure your safety and see that your interests are well protected. However, you can make it a lot safer if you go that extra mile and take some additional precautions. Here is how you can protect your trading account and your demat account.

How to protect your trading account?
If you have a trading account and trade in equities and in F&O, here are some basic checks and balances that can help.
  • Whenever you trade, ensure that you review your contract note and verify that all trades in the contract note are of the quantity and the price level confirmed to you.
  • Take stock of your ledger account on a regular basis. You can use the ledger account to reconcile your trading account balance and you must do that every week. Also, review charges debited and ensure that there are no unauthorized debits to the ledger account.
  • You can register for online trading to make the process of executing transaction simpler and more efficient. But, you must ensure that you keep the password and user name safe and never share with anyone.
  • When you are operating your online trading account, ensure that the machine has an anti-virus and anti-malware that is updated. Never access your trading account from cybercafé or on public wi-fi. Ideally, use secured connections only.
  • In case you trade on margin in F&O or intraday, brokers allow you to pay the margin in cash or as shares. When you leave shares or cash in the pool account, take periodic stock and get transfer-in of shares and funds every month. This is a good checkpoint to prevent any misuse of your trading account.
  • If you are unlikely to trade for a long period of time, it is advisable to get any funds or shares in the broker pool account transferred into your bank and demat account.
  • Make it a point to update your mobile number and email with the broker and the DP at all times. This will ensure that you do not miss any trading alert sent by the broker. If you don’t update your mobile numbers, it could also be misused.
  • If you find discrepancies in the trading account, immediately give a written complaint to your broker and if you don’t get any response escalate to NSE / BSE / SEBI.
How to protect your Demat account?
Demat account is like a bank account holding shares. It is your private equity locker so deal with it carefully.
  • If you don’t trade on margins or in F&O, there is no need for your shares to lie in your broker pool account. Such shares should be transferred to your demat account by the end of T+2 date. If you don’t get credit in 24 hours after that, escalate it to NSDL/CDSL.
  • Even if you offer shares as margin, take the shares into your demat account, at least once in a quarter. This will help you to keep a tab on the stock movements.
  • Remember that power of attorney is a convenience for online trading cum demat account; it is not mandatory. It is just that it is too cumbersome to give physical DIS each time you sell shares. Instead, you can also opt for online DP applications like “Speed-e or Easiest”, where you can give online demat instructions without giving power of attorney.
  • In the event you are giving a general Power of Attorney to your broker (as a wealth client), read the fine print and you can even specify the conditions under which the POA can be used by the broker / DP.
  • NSDL / CDSL send messages when there are debits to your demat account. Ensure that you mobile number and email are updated.
  • Make it a point to download and maintain a print copy of your transaction statement and demat holdings statement each month. This can highlight discrepancies.
  • Lastly, in case you are using physical DIS, only used numbered and stamped DIS booklets. Never leave signed DIS with the broker. This may look like a simple solution, but you are asking for trouble.
A little bit of caution can go a long way in protecting your trading and demat account.

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