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Wednesday, April 28, 2010

Optional & Limited power of attorney execution by client in favour of stock exchange/depository participant - SEBI guidelines

Execution of Power of Attorney (PoA) by the Client in favour of the Stock Broker and Depository Participant
1. A Power of Attorney is executed by the client in favour of the stock broker /stock broker and depository participant to authorize the broker to operate the client’s demat account and bank account to facilitate the delivery of shares and pay – in/ pay – out of funds.  The cleint shall not be forced to execute Irrevocable Power of Attorney.
2. Generally, the PoA is taken from the clients who want to avail internet based trading services. For offering internet based trading services, a Stock Broker requires necessary authorizations for seamless trading, collection of margins as well as settlement of funds and securities. Further, some of the Stock Brokers also obtain authorizations from their clients to offer non-internet based services.
3. Standardizing the norms for PoA must not be construed as making the PoA a condition precedent or mandatory for availing broking or depository participant services. PoA is merely an option available to the client for instructing his broker or depository participant to facilitate the delivery of shares and pay-in/pay-out of funds etc. No stock broker or depository participant shall deny services to the client if the client refuses to execute a PoA in their favour.
4. The Stock Brokers shall take necessary steps to implement this circular latest by May 31, 2010 for the new clients and ensure to take necessary steps latest by September 01, 2010 to revoke those authorizations given by the existing clients to the stock brokers/ stock broker and depository participants through PoA that are inconsistent with the present guidelines.

5. The POA should be limited & shall not facilitate the stock broker to do the following:
a. Transfer of securities for off market trades.
b. Transfer of funds from the bank account(s) of the Clients for trades executed by the clients through another stock broker.
c. Open a broking / trading facility with any stock broker or for opening a Beneficial Owner account with any Depository Participant.
d. Execute trades in the name of the client(s) without the client(s) consent.
e. Prohibit issue of Delivery Instruction Slips (DIS) to beneficial owner (client).
f. Prohibit client(s) from operating the account.
g. Merging of balances (dues) under various accounts to nullify debit in any other account.
h. Open an email ID/ email account on behalf of the client(s) for receiving statement of transactions, bills, contract notes etc. from stock broker / Depository Participant.
i. Renounce liability for any loss or claim that may arise due to any blocking of funds that may be erroneously instructed by the Stock Broker to the designated bank.

Source: SEBI CIR/MRD/DMS/13/2010 dated 23rd April 2010

5 comments:

Mike said...

The "Power of Attorney", sure is a powerful paper, if used in the right way and at the right time. It is advantageous to keep several copies of PoAs in your safety because you don't know when you may need one, especially during crucial times. There are many estate lawyer in Ottawa that you can trust to furnish your PoA paper for very important matters.

I first have known its importance when my brother and I bought new houses for each of us. With the help of the law firm, Ottawa, Ontario who attested the PoA, the legal processing of the houses are made easier. We even get a discount for the houses because my brother is a soldier and they are given such benefits.

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Arti Singh said...
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