Impact of Operation Demat Daka: In a bid to control growing incidents of equity market fraud involving retail investors, the Securities and Exchanges Board of India (SEBI) has ordered exchanges to keep track of IP addresses of all transactions. The directive came against the backdrop of Zee Business’ “Operation Demat Daka” show, which exposed flaws in the system used by fraudsters to steal from investors.
The market regulator in its new order said it was necessary for trading members to share information about the IP address of customers.
Zee Business Editor-in-Chief Anil Singhvi welcomed the decision and pledged to continue to raise the voice of investors. He said brokers allowing desktop trading over the Internet or trading securities using wireless technology to clients will need to record clients’ IP addresses in a particular format.
The cases of hacking investors’ Demat account and selling their wallet shares, while wiping all their assets and money from the account, were reported by Zee Business in a one-hour special on Operation Demat Daka in two editions.
In the first edition, the chain explained the modus operandi by inviting certain victims to the studio, while in the second edition, it explained the flaws in the system and the brokers as well as the reaction of the GRC to this hack.
Earlier on Friday, SEBI had also released a framework for the automated deactivation of trading accounts and Demat investors in the event of insufficient Know Your Client (KYC) details. The framework will come into effect from August 31, according to a circular.
Noting that addresses are an essential part of KYC procedures, SEBI said that every address registered for the purpose of compliance with KYC procedures must be accurate.
An intermediary is required to update the address from time to time. However, the regulator has observed that in some cases exact or updated customer addresses are not retained. This is supported by the fact that when Sebi issues notifications, during any execution procedure on these addresses, these remain unserved.
The new rules are intended to ensure that the customer provides accurate or updated address information and to ensure that the KYC information is correct.