Analysing The Legal Challenges Being Faced By Investors In Digital Financial Markets

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Debamita Ray, BBA LLB (Hons.), Amity Law School, Amity University Kolkata.

Srestha Mitra, B.COM LLB (Hons.), Amity Law School, Amity University Kolkata.

ABSTRACT

The evolution of online trading and the usage of demat accounts have transformed the traditional Stock Market trading. Only the benefits are highlighted but the disadvantages are not. It is an era where Demat Account is an essential tool for flawless paperless transaction especially at the time when digital financial market has revolutionized the traditional investment practices. While investing, an investor may face several challenges such as system glitch in their foreign brokerage app which can lead to a wrongful stock purchase and the problem will enhance if the broker denies responsibility. If an investor follows a stock tip and invests without knowing the fact that his promoter is artificially inflating the stock price he will face loss. The enforcement for remedy is slow in digital markets. What happens if an investor's credentials are compromised while investing by using the demat account or the invested amount doesn't reflect in their account? The need for more efficient cyber security, investor protection and the importance and barriers of digital literacy is often not highlighted in the discussion of transition from traditional to digital trading system. Our intention is to look into the legal challenges in the digital financial market which are faced by investors in a daily basis. This paper critically examines several legal challenges in demat account such as cyber frauds, data security, regulatory loopholes and enforcement of investor rights. It analyses whether the current regulations, and authorities like SEBI are adequate or not in safeguarding investor's safety and if there is any need for stronger legal mechanism to ensure transparency, with exploring the legal challenges and potential solutions. This article aims at understanding the importance of creating investor friendly, secure demat transactions. Although AI is a part of digitalization if used carefully and with precaution it can make digital transactions a better experience.

Keywords: Demat account, Cyber frauds, Investor protection, Regulatory loophole.

ANALYSING THE LEGAL CHALLENGES BEING FACED BY INVESTORS IN DIGITAL FINANCIAL MARKETS.pdf

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