Do’s And Don’ts For A Demat Account
A demat account is similar to a bank account. It stores securities in electronic form instead of money or cash deposits. It simplifies the online trading process and counters the risks associated with physical share trading. However, there are some things that you must be aware of especially after opening a demat account. In this article, we will talk about the do’s and don’ts that you must follow after getting a demat account. Let’s talk about the do’s first!
Do’s for a Demat account
Check the detailed account statement regularly
All the online transactions are automatically updated in the demat A/C. For instance, if you have bought, sold, or transferred shares online, the details can be cross-verified by downloading a detailed account statement. Checking the account statement is essential to check whether all the credits and debits of shares are reflecting accurately or not. If you find any discrepancy, you can report the same to your broker.
Update the contact details
Keep your contact details updated in your demat account. Your demat account must reflect your correct contact number, email id, and address. It will allow the broker to contact you or send notifications if there is any need.
Freeze your Demat account when not in use
It is possible to freeze an online demat account when you are not using it. Freezing a demat account will prevent its misuse by rendering it inactive for a specific period. It will also stop the unnecessary debits to your demat account. You can decide the period as per your convenience. Also, you can allow the credits if you are expecting dividends or other corporate actions to be credited in that given period.
Don’t for the Demat account
Don’t give all the powers to the power of attorney
If you authorise someone to trade on your behalf, ensure that you don’t give a general power of attorney. It means giving away all the powers to the power of attorney. The powers can be misused by the power of attorney. You can limit the powers by assigning only specific rights to the power of attorney.
Don’t keep the delivery instruction booklet signed
Anyone can use the DIS (Delivery Instruction Slips) to transfer the shares from your account to another account if it is pre-signed. Therefore, you must avoid signing all the slips after receiving the DIS booklet from the broker. Also, ask your broker to get the client ID and account number stamped on each slip to avoid misuse.
Don’t share your passwords and OTPs
To ensure the authenticity of your transactions, brokerage service providers cross-verify them by sending an OTP (One Time Password) to your registered email address or mobile number. You should never share the OTP with anyone as they can misuse it to carry out fraudulent activities in your account.
Also, don’t give your demat account number and demat account password to anyone including your broker. It will expose your critical financial data as anyone would be able to log into your demat account with your user id and password.
Don’t leave the trading account screen open
While doing online trading, don’t leave the trading account screen open even if you are planning to return to the screen after a short while. Someone might use your trading account to invest in unknown stock companies. Also, if you visit a cyber cafe and login to your trading account, ensure that you don’t permit the browser to remember your passwords and account number.
Don’t engage in transactions with unknown Demat accounts
Off-market transfers include transferring shares to another demat account via offline method. Offline share transfers with unknown demat accounts are closely monitored by SEBI (Stock Exchange Bureau of India). You will have to explain your actions if the SEBI officials suspect the transaction to be a fraudulent one. Upon finding guilty you might have to face legal consequences. Therefore, avoid offline transfers and even if you engage in such transactions, ensure that you are familiar with the demat account holder.