Learn How to Safeguard Against Demat Account Fraud

Ever since the concept of demat account has been introduced by the Securities and Exchange Board of India (SEBI), it has been a game changer in stock trading. Dematerialised trading eliminated the risk of bad delivery, fake share certificates, delays, thefts and counterparty risk.

While demat account is definitely efficient, faster and hassle-free, no system is foolproof. Despite all efforts to strengthen the system, the number of fraudulent demat account incidences have increased in the last decade.

While more and more investors are being attracted to the stock market, most novice investors do not know how to protect themselves.

If you are among the investors who do not know what precautions to take to prevent demat account fraud, this article is for you. We have listed below a few easy steps that can help you substantially reduce the risk of a demat account fraud.

Ways to Protect your Demat Account from Fraud

· Safeguard your login details

It is crucial to keep your login information secure. It is advisable to keep a strong password or keep a biometric password. Try to remember the password and not write it anywhere to avoid the risk of unauthorised access. Furthermore, it is wise to change your login password at regular intervals.

· Freeze your Demat account when not in use

If you are travelling abroad or you know that you are not going to use your demat account for a while, it is recommended that you give a signed application to your depository participant to freeze your demat account in order to prevent the risk of phishing or scams.

Note: Even when you freeze your demat account, you continue to receive corporate actions like dividends, bonuses and splits.

· Keep track of your account statements

Just like you have a passbook for your bank account, you have DP holding and transaction statement for your demat account. A holding statement is a summary of all the shareholdings held in your Demat account on a particular date. A transaction statement is a summary of all the share credits and debits that take place in your demat account on a particular date.

Ensure that you keep your email id and phone number updated at all times and carefully review all the statements sent over email and SMS sent by the depository participant. It is a good practice to regularly match all the transactions in your demat account to your trading activity and if there is any discrepancy, immediately report it to the depository participant.

· Secure your Debit Instruction Slip (DIS) booklet

The DIS booklet for your demat account is equivalent to your bank cheque book. You are required to sign the DIS before transferring your shares from one demat account to another. Therefore, it is important to safeguard your Debit Instructions Slips at all times. Make sure that you do not leave your signed DIS booklet with your broker or anywhere else.

· Power of Attorney

If you are giving power of attorney to your broker, make sure you give a limited purpose power of attorney which will require your broker to take your permission before selling or transferring funds or securities from your demat account. In fact, you can anytime revoke the power of attorney without any notice except in the case of outstanding dues.


As the saying goes, “eternal vigilance is your best defence”, being vigilant and taking care of these small things can go a long way in improving your safety quotient. Protect your demat account by implementing these tips and safeguard yourself from demat account fraud.

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