Subra where should I open my demat account? I wish to INVEST in shares. After saying this, they also ask “it this brokerage rate a fair rate” . In my mind if you are an investor, the brokerage rate does not matter. However if you are a trader, the brokerage rate is the most important thing to consider. So first decide on whether you are an Investor or a Trader.

So many people ask me this question that I can reply without much thought…..

Well to start with,

1. Do not open with a broker: I know how a broker used client A’s share to do a pay in for client B. It is a matter of relief that the shares were replaced next week, but this is FRAUD. I am not too keen to say ‘open with a reputed broker’. One senior regulator told me that ‘reputed broker’, ‘reputed builder’ etc. are oxymorons. To me they are like Santa Claus – we have all heard about him. Period.  Do not worry you can have as many demat accounts as you wish to have. If you have say Rs. 100, 000 worth shares  in your demat account and you wish to distribute it among your 2 children, open 2 demat accounts. Make them a nominee in each account. Simpler than writing a will.

2. A bank has no advantage in fiddling with your shareholding at all, so chances are they will not fool around with your shares. A broker can do this by a very simple method called PoA – Power of Attorney. It is one the worst things that you can do when dealing online with a broker. Hey, but the broker will not deal with you UNLESS you sign a PoA. Catch 22 situation?

3. Whoever you open with please keep checking your statement. And keep checking regularly – so an online access is a must. And you should use it. A friends shares of Hdfc went missing for a week – he screamed at the broker (one of those reputed ones). It came back and was paid Rs. 50,000 for not telling the regulator about this incident. Client is now dead and gone!!

4. If you are not going to buy or sell shares for say 4 months, request the service provider to freeze your account.

5. Most brokers will want you to open an account with them. In such a case open one account in a bank where you will keep your big long term holdings and one with the broker for trading.

6. A big reputed broker or a small not very reputed broker behave the same way under stress. Repeat.

7. Look at the costs too. My account is with a bank, and I think I am paying very high charges, but will live with that I think – resistance to change and afraid of needing to sign in 43 places.

8. Stock Holding is the only non bank non broker to give this service – and is not a bad choice at all. Has reasonable checks and balances and will be more careful than a broker.

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  1. Sir,
    “Stock Holding is the only non bank non broker to give this service” –Actually Stock holding acts as sub-broker for their group company, which is a broker. I think IL&FS is a pure Demat provider and could be safer option. Sir these days SMS is sent when Demat a/c is debitted. So chance of customer shares being used is very less these days. Previously on credit also SMS was sent, don’t know why credit SMS was stopped by SEBI. Actually broker RM’s, dealers are pretty dangerous people and should be avoided for any trades.

  2. Dear Subra .. i tied to find a answer to this question , but could not find conclusive answer online , can you please help .. what would be the Tax Implication of transferring shares from single to joint demat a/c where the Single Holder continues to be the First Holder in the Joint Demat Account too .. from the point of view of LTCG or any other Tax

    Your sharing of knowledge is greatly appreciated.. Thank you

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