For trading or investing in securities, be it of any kind, you need a Demat and trading account. These are referred to as brokerage accounts and are necessary for investing. The shares you purchase or sell need the trading account for buying or selling while the Demat account holds the shares you have, and when you sell, the shares get debited from this account. As there are multiple assets in the stock market to trade, one can find it difficult with one Demat account to invest or trade across different assets or segments. If you think it would have been better if you could have multiple Demat accounts or Trading accounts, then it is possible.
Is Having Multiple Brokerages Accounts Legal in India?
As SEBI has no limitation on having multiple Demat or trading accounts, you can open multiple trading and Demat accounts for the ease of trading and your different trading and investment requirements. However, the most important criteria of SEBI for multiple brokerage accounts is when you open a brokerage account apart from the existing one, you have to link the new account to the PAN number you have as mentioned with the existing account/s.
This is necessary so that the regulatory authorities like SEBI, Income Tax Department can access comprehensive data of all your investments linked to your PAN number.
Apart from linking with the same PAN, there is another legal or regulatory factor you need to consider which is you cannot open multiple Demat or trading accounts with the same brokerage house/ Depository Participant. It is strictly prohibited by SEBI, as their guidelines clearly state under any circumstances one cannot open multiple brokerage accounts with the same DP. If you want a free brokerage account, you have to look for another DP.
Why Open Multiple Brokerage Accounts?
If you are wondering about the benefits of having multiple Demat and trading accounts, then here are certain factors that you can consider –
- Ease of tracking all your investments: When you have more than one Demat and trading account, you can track all your investments easily. This is because you can trade/ invest and hold different assets like equities, currencies, bonds, and commodities using different brokerage accounts. As you diversify your portfolio, there are different categories of assets you can invest in. Tracking them all together in one single brokerage account can be difficult.
- The definition of the best brokerage account In India differs from one investor to another. Suppose you consider a brokerage account to be the best if it has the lowest brokerage charges, while your friend thinks the best brokerage account is one with the most facilities and products. Thus, if you want different add-on services, and low brokerage in one place, you have to go for multiple brokerage accounts.
- Another benefit of having multiple brokerage accounts is that most of these accounts are nowadays free to open. So, you do not need to pay any extra fee or charges to open multiple Demat or trading accounts. You can open and link them to your PAN and organize your assets and investments easily, and enjoy trading.
Things to Consider While Opening Multiple Brokerage Accounts
While there are different advantages of having multiple brokerage accounts, there are certain things to consider as well –
- Multiple brokerage accounts will have multiple annual maintenance charges, if not the opening charges. As most brokerage accounts these days can be opened for free, maintenance charges especially, on the Demat accounts, are charged by most of the brokerage houses. So, you will have to bear multiple AMC if you have multiple Demat/ trading accounts.
- Another factor to consider is whether you need the account or not. If you do not need multiple accounts, then opening them can only burden you with AMC and other charges.
So, opening multiple brokerage accounts in India is allowed, and legal but whether you need the same or not is the primary question you need to ask yourself before opening them. If you need one for bettering your investments and organizing your assets properly, you can open multiple Demat and trading accounts with the same PAN and different DPs.