How To Safeguard A Demat Account Against Fraud?

For years investors have associated demat accounts with convenience, as they allow seamless transfer of securities and funds. However, instances of fraud have soured the experience for some. A few weeks ago, a Dalmia Bharat Group company complained that its broker had unauthorisedly transferred `344 crore worth of mutual fund units from demat accounts of its subsidiaries. The broker had transferred the units for use as collateral to make up for margin requirement on trades of its associated firm... 

The incident raised concerns about the safety of demat accounts. What recourse does the investor have if holdings go missing? Can units that vanish be traced? What precautions can one take to guard against such fraud? 

How to safeguard against fraud 

Make sure mobile number and email ID records are updated with the depository

Check SMS or email statements sent by depository after every transaction in demat account

Check holding statement issued by broker every month

In case of fraud or inaction by broker, make timely complaint to the depository

Avoid keeping excess money in broking account; transfer money from savings account only at time of purchase 

The onus is on the investor to remain vigilant and keep tabs on the movement of shares and mutual fund units. Both the broker and the depository (CDSL or NSDL) send SMS alerts or email statements for all transactions in a demat account. It is critical to verify the details every time you transact.