A demat account is a record and an ownership statement. It is like a bank account where you maintain your equity holdings. Remember, while your DP helps you to open the account, the shares are actually resident with the depository; NSDL or CDSL. Being government backed organizations your shares are absolutely safe. As an investor holding the shares you are the beneficial owner (BO) in this case. To ensure your safety and security you need to follow some basic rules to get the best out of your demat account.
5 Dos for your demat account
- You must make it a point to regularly verify your transaction statement carefully for all debits and credits in your account. In case of you see any unauthorized debit or credit, inform your DP or CDSL/NSDL. While the DP will make the statement available to you quarterly and annually, you must opt for the online system to be able to view and check your statement on a real time basis.
- The next point follows as a logical corollary. Handle your Delivery Instruction Slips (DIS) Book issued by the DP very carefully. Insist that the DIS numbers are pre-printed and your account number (client id) is also pre-stamped on each DIS page. Don’t use and don’t accept loose leafs from your DP. Don’t leave signed DIS slips with your broker, DP, sub broker and above all, make it a point to keep it in a secure and safe place.
- Some dos you need to remember when you fill up the DIS. Always mention the details like ISIN, number of securities accurately. If in doubt, contact DP or your broker immediately. The broker may ask you for a power of attorney to simplify the Demat process. While that is convenient, there is no onus on you to accept that arrangement.
- There is something called freezing the account, in case you are not going to transact on your DP account. In case you are not transacting frequently make use of the freezing facility provided for your demat account. This will ensure that there can be no debits and credits to your demat account unless you give a letter to de-freeze the account. This is very useful when you are likely to be abroad for a prolonged period of time.
- While sending securities for demat, record the distinctive numbers of securities sent along with the folio number of the share certificates. Ideally, keep a copy of the certificate with you. Make it a point to intimate any change of address or change in bank account details to your DP immediately. Address and bank mandate change require your signature and any delay can create problems for you in the future.
5 Don’ts for your demat account
- When you fill up your DIS, avoid over-writing, cancellations, misspellings, of the name and quantity of securities. Ensure that the ISIN code and the number of shares are written with precision and make it a point to double check
- Do not issue demat delivery instruction slip from any other family members, friend’saccounts? Issue the DIS only from your own demat account. Also don’t offer your shares to others. When you are travelling avoid leaving signed DIS slips with your family members to take care of emergencies. Any such laxity can cause you damage.
- Don’t pay any of the demat charges in cash. Ideally all charges should be by cheque or by online bank transfer, however small the fee may be. This is in your interest as it will avoid any misuse of cash.
- Don’t sell more shares than you have in your demat account. While the broker will check your balance before executing in case of online transactions, the onus is still on you. Always make it a point to check the clear balance in your demat account before you issue any DIS. This is more so in case of T2T stocks because these T2T stocks cannot even be closed intraday.
- Don’t do offline transfer of shares to another demat account unless it is a genuine cases. The regulator and the depository keep a close tab on off-market transfers and if it feels that the transaction is not genuine, then you can get a notice to explain yourself. Avoid such situations as it is not ethical.
- Do not sign blank Delivery instruction slip(s) while meeting security payin obligation