The electronic transfer of financial securities has become seamless in the dematerialisation (demat) era. Investors and traders no longer have to be physically present during the transfer process. And the possibilities of loss, theft, and damage have declined because securities are stored in digital form.
But do not assume that demat account usage is completely risk-free. Those who possess your demat account information can still make unauthorised transactions without your knowledge or consent. Anyone who has access to your demat account information could forge your signature and carry out transactions.
Preventing unauthorised transactions
To prevent such transactions, you must be aware of the risks and stay vigilant. Here are some tips to help safeguard your demat account.
Provide updated contact details to your depository participant (DP)
This ensures that you receive timely notifications and transaction alerts. If you receive end-of-day alerts over email and SMS, go over them with care. Make it a habit to check every demat alert you receive and you should be able to spot unauthorised activities right away.
Examine your transaction and holding statements carefully
A transaction statement provides detailed information about each transaction that has occurred through your demat account. Look at the stock movements, study the number of units bought or sold, examine the transaction dates, and check if the funds have been debited from or credited to your account properly. Do this once a week or month to stay on top of things. You should also check your holding statements on a monthly basis to assess if everything is in order.
Contact your DP in case of discrepancies
If you do spot any peculiar activity or discrepancy, get in touch with your DP immediately. The sooner you act, the easier it will be for the DP to take action in case of an error or a fraudulent transaction. Since stocks are traded electronically, assets that have been transferred can be traced. But you need to act before the third party sells or redeems these. If you delay, it may not always be possible to recover your money or holdings.
Freeze your account as a last resort
If you suspect fraudulent activity in your account, call your DP and issue instructions to freeze the account. This is useful especially if you are travelling abroad, when your local phone number might not work and you might not receive alerts in time. You can always unfreeze the account at a later date.
The onus is on you to keep tabs on the activities in your demat account. Your broker is obliged to issue timely transaction and holding statements. But you will need to look out for discrepancies. Be vigilant about this, for if an unauthorised transaction has taken place and you have not reported the issue in time, any arising dues or obligations will have to be settled by you. That is why it is essential that you open a demat account with a reliable DP like Kotak Securities which places a high priority on security. The extra support can go a long way in safeguarding your financial assets.