Share market frauds are more prevalent during bull runs. The so-called predators often look for vulnerable investors, especially those who are over-trusting, less informed, or who are not so caring, or investors who are out of India and face challenges to access information.
Today’s post focuses on protecting yourself from share market fraud. These 2 news pieces below motivated us to write these and present them to you here. First news was shared by our NRI investor, and his question was the same – how do we protect ourselves from these? Here are the steps to ensure a lot of safety. But let’s start with the 2 mishappenings in the share markets in recent times.
News 1:
Mumbai Man, 72, Loses Rs 35 Crore In Trade Fraud. He Was Unaware For 4 Years
A shocking case of financial fraud has emerged in Mumbai, where a 72-year-old businessman was scammed out of around Rs 35 crores.
News 2:
How to protect against share market frauds?
- Open/retain accounts only with well‑regulated brokers/DPs linked to CDSL/NSDL and registered with SEBI. Avoid little‑known fintech fronts or sub‑brokers. Low cost is not everything.
- For every trade, there are multiple alerts triggered over email, SMS, WhatsApp & trading/Demat app. Make sure the app/accounts have the correct email & phone numbers.
- Ensure your NRE/NRO bank accounts and trading account have the correct NRI status, FATCA/CRS, and current overseas contact details so that alerts actually reach you.
- Turn on all SMS/email/app notifications and review CDSL/NSDL and broker contract notes and statements at least weekly, matching them with trades you actually placed.
- You get a contract note within 24 hours of the trade. Do not ignore the communication received via Email and SMS in respect of your trades and verify the same with the contract notes received by you. These are made available online (you may download statements online by logging into your trading account. Check them regularly.
- Keep track of your portfolio and the trades in your Trading / Demat Account regularly, including funds/ securities transfers to/from your account, and report for any discrepancy within 48 hours, if any
- Trades have a system of 2-factor authentication means it requires client approval at 2 systems minimum. So approval has to be over email, via sms or via OTP. Make sure you are involved in the process and only hand over approval when you are aware & sure of the transaction.
- Make annual checks of trades done in all a/c, including family members’ accounts also. See for any suspicious activity or balance reduction reason.
- Close all DEMATS & TRADING a/c that you are not using or opened in the past. These a/c may be used for fraudulent purposes.
- NRIs should keep their Indian phone in ON & Working mode so that they may get information about any activity done by a third person. This is an added cost but helps mitigate fraud.
- Never share your confidential information, password, PIN or OTP with anyone over the phone or internet or any other channel of communication. Do not provide Delivery Instruction Slips/cheque/ any blank form/documents with or without signature to anyone, including employees of your demat/trading a/c firm.
- When your portfolio is churned, the tax payment will occur. While filling returns, always check the CAPITAL GAIN & LOSS statement. The annual statement is available within a few days of the end of a financial year. Specifically check the short-term losses & gains. See if you authorized these transactions.
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All these gains are reported by the broker to the income tax department. You can download the AIS app and check these anytime.
- Maintain device, email, and network hygiene. Access accounts only from your own devices secured with updated OS, antivirus, and screen‑lock/biometrics; avoid cybercafes and shared office systems.
- Use a password manager and enable 2FA on your primary email, because a compromised email often leads to trading and bank account takeover.
- Avoid public Wi‑Fi for trading; if unavoidable, use a trusted VPN and never approve profile/password changes while on such networks.
- Put into practice Demat‑specific controls ( this is very important if you are based abroad). Register directly on CDSL/NSDL “easiest” / “IDeAS” type facilities (apps) to receive independent SMS/email alerts on all debits, pledges, and off‑market transfers, not just broker messages.
- If you do not plan to trade for a while, ask your DP to “freeze” the demat account or specific ISINs so that no debits/pledges can happen without your explicit unfreeze request.
- Avoid giving a broad Power of Attorney to brokers. Use limited PoA only if absolutely required, and prefer e‑DIS / TPIN-based one‑time consent for every sale.
- Never send PAN, Aadhaar, passport, or cancelled cheque copies over WhatsApp/Telegram or to personal email IDs; upload only via official portals (check “https” and correct domain, and for banks watch for “.bank.in” migration as an authenticity signal).
- Be skeptical of “relationship managers” or “advisors” pushing frequent F&O, margin or penny‑stock trades, especially if they ask for OTPs or log in to “help you execute”.
There can be many more ways. If you are aware of any such tip, please let us know. We will thank you and add it here. This will prevent & protect many against shar market frauds.
