Is Demat Account Handling Safe?

So, you’ve decided to put your money to work in the stock market. Congratulations! It’s an exciting journey, but naturally, as you start exploring, a big question likely pops up: Is demat account handling safe? 

Whether you are hearing about “account handling services” from a friend or just wondering if your digital shares are secure from hackers, it’s completely normal to feel a bit protective of your hard-earned savings.

Let’s break this down into simple, everyday terms so you can invest with peace of mind.

Is Demat Account Handling Legal in India?

Demat account handling refers to the ongoing management and administration of a dematerialised account used to hold financial securities like stocks, bonds, and mutual funds. 

Now, this is where things get interesting. 

In simple terms, it refers to the management of your account. This happens in two ways:

1. Legitimate Handling: This is what your broker (like Zerodha, Angel One, or ICICI Direct) does. They provide the platform and technology to execute your trades safely.
2. Third-Party Handling: This is when an individual or an agency offers to “handle” your account for you, often promising guaranteed profits if you give them your login ID and password.

If your SEBI-registered stockbroker is executing trades for you through their official app or platform with your consent, you’re on perfectly legal ground. 

This is the normal, well-regulated way of investing, and every action is tracked, audited, and protected by strict SEBI rules. In short, this is how the system is meant to work.

However, if the same broker handles your account and misleads you in your trading journey, then it is illegal and could be risky. 

Many investors also ask, can a Research Analyst handle an account in India, and the answer is a clear no. Research Analysts can only provide recommendations and advice; they are never legally allowed to execute trades in your account.

Other than registered entities, there are a few unregistered individuals who claim to be “market experts,” “sure-shot profit traders,” or “account handler,” and asks for your Demat login ID and password. 

That’s where alarm bells should start ringing. 

While SEBI may not use the word “illegal” outright in every case, this practice is strongly discouraged and firmly sits in the danger zone. 

Why? 

Because once you share your credentials, you’ve effectively handed over full control of your money to an unauthorised person, with zero regulatory protection.

In India, only SEBI-registered Portfolio Management Services (PMS) are legally allowed to manage investments on behalf of others. 

Even then, PMS is meant for high-net-worth investors and comes with strict eligibility norms, including a minimum investment of around ₹50 lakh. 

Random Telegram traders, Instagram “gurus,” or WhatsApp tipsters simply do not qualify,  no matter how confident or convincing they sound.

The rule of thumb is simple: your Demat login is as sensitive as your bank PIN. If you wouldn’t hand that over to a stranger, your trading account deserves the same level of caution.

Can Someone Trade On My Behalf?

Many investors wonder if someone else can trade on their behalf, especially when they are busy or unsure about making trading decisions themselves.

• In India, this is allowed only in limited and regulated cases through SEBI-registered Portfolio Management Services (PMS), which are meant for high-net-worth investors and follow strict rules.

• Outside of PMS, no research analyst, investment adviser, or individual is legally allowed to place trades in your demat account; they can only offer advice.

• Issues arise when unregistered Telegram traders or self-proclaimed experts ask for your login ID and password to “manage” trades, which is a major red flag.

• Sharing credentials hands over full control of your money and leaves you with little protection if losses occur.

• Even brokers with Power of Attorney have limited authority and cannot trade freely without your consent.

• The safest rule is to treat your demat account like your bank account and never allow unauthorized access or guaranteed-return promises.

Demat Account Handling Risks

To be blunt: Demat account handling service safe or not? If we are talking about a third-party service or a “Telegram Guru” asking for your password, the answer is a loud and clear “No.” 

When you share your login credentials, you aren’t just letting someone “manage” your stocks; you’re handing over the keys to your financial locker. 

In 2025, SEBI made it even clearer that what is demat account handling should only be done by you or a registered PMS (Portfolio Management Service). Anything else is a massive red flag.

Sharing your access might seem like a shortcut to profits, but it usually leads to a dead end. Here is a deeper look at the risks you face:

• The Nightmare of Unauthorised Trades: A handler might use your money to make “risky bets.” In many recent scams, unauthorized handlers have been caught using client accounts for “Pump and Dump” schemes, buying low-quality stocks at high prices to benefit themselves while your portfolio takes the hit. By the time you notice, your capital could be wiped out.
• The Risk of Full-Scale Data Theft: Your demat account isn’t an island. It’s linked to your PAN, your Aadhaar, and your primary bank account. If a hacker or a shady handler gets in, they don’t just see your shares; they see your personal identity. They could misuse this data for identity theft or even try to manipulate your bank links.
• The “No Legal Recourse” Trap: This is the part that hurts the most. If a handler loses your money or disappears, you might think, “I’ll just complain to SEBI.” But here’s the catch: because you willingly shared your private credentials (password/OTP), you’ve technically violated the security terms of your broker. This makes it incredibly difficult for authorities to help you recover your funds. You’re essentially left on your own.

What Can You Do in Such Cases?

If your demat or trading account has been misused through unauthorized handling, whether by an unregistered operator or a SEBI-registered Research Analyst (RA), Investment Adviser (IA), or other intermediary acting beyond their permitted role, you should act immediately. 

Prompt reporting helps limit further losses and enables regulators to identify and stop such regulatory violations.

1. Contact Your Broker Immediately

• Inform your stockbroker’s compliance or customer support team as soon as you notice unauthorized trades or suspicious activity. 
• Request an immediate freeze on your trading and demat account to prevent further misuse.

2. Document Unauthorized Access or Instructions

• Preserve all evidence, such as chat messages, emails, payment proofs, call recordings, and trade confirmations 

3. Lodge a Complaint with SCORES

• If a registered entity is involved in unauthorized account handling, profit-sharing arrangements, or execution of trades without consent, you should file a complaint on SEBI’s SCORES portal. 
• While reporting does not guarantee recovery of funds, particularly where illegal profit-sharing models are used, it allows SEBI to monitor misconduct, initiate regulatory action, and restrict repeat offenders from operating in the securities market.

4. Escalate if Account Handling Violates SEBI Regulation

• SEBI regulations strictly prohibit Research Analysts and Investment Advisers from executing trades, accessing client login credentials, or operating demat accounts on a profit-sharing basis. 
• Any such activity by a registered entity constitutes a serious regulatory breach and should be clearly highlighted in your complaint.

Need help?

If you require assistance after experiencing illegal or unauthorized handling of your demat or trading account, whether by an unregistered operator or a SEBI-registered Research Analyst (RA), Investment Adviser (IA), or other market participant acting outside regulatory limits, you can register with us

By registering with us, you gain access to expert guidance tailored to your specific situation.

Our team will help you understand the regulatory violations involved, assist you in organizing supporting evidence, and guide you through the appropriate reporting and grievance-redressal channels, including broker escalation, SEBI complaints and also representing your case in arbitrations in stock market. 

Our objective is to help you take timely and informed action while minimizing further risk to your investments.

Conclusion

So, is a demat account safe? Absolutely, but only as long as you are the one holding the keys. 

With the new SEBI rules in 2025, like the Direct Payout Mechanism, the system is designed to keep your money moving directly between you and the clearing house, cutting out the middleman.

Handling through your broker’s app? YES.

By sharing your password with a third party? NO.

The best way to handle your demat account is to learn the basics yourself or consult a SEBI-registered investment advisor. Your money is your responsibility; keep the keys to your “digital locker” close to you!