After reading my previous article INVESTOR BE AWARE, a friend of mine raised a very good question that whether it is compulsory for an investor to sign and give a Power of Attorney (PoA) to the broker or not. This problem is faced by many investors specially at the time of opening a demat and trading account. Generally brokers ask the client to sign the entire booklet of Account Opening Form including the PoA, and the investor is also least bothered to check the contents of the pages on which he is signing. But not all investors may be willing to provide the right to operate their account to the broker. A PoA is executed by a client in favour of a broker to authorise the broker to operate the client's demat account and bank account to facilitate the delivery of shares and payment of funds.
PoA s are generally required for Internet based trading facilities or where the client wants to avoid the hassles of submitting the Delivery Instruction Slips(DIS) after every sell order. But most of the brokers insist on providing the PoA even for non-internet trading facilities. Considering this situation and the possibility of brokers misusing the PoA, market watchdog Securities and Exchange Board of India (SEBI) has taken some stringent measures to protect the interest of the investors. It has barred the brokers from taking PoAs that are irrevocable or allow the broker to conduct any transaction without client’s consent. No broker can refuse to provide services to a client simply because he has refused to sign the PoA. Also, no PoA can prohibit the client from operating the account directly. These new guidelines for PoA are to be complied by each and every broker.
An investor, before signing a PoA, should read its clauses thoroughly. Power of Attorney is a facility introduced for the convenience of investors, however there is no such compulsion either by the Depository or by the Stock Exchanges to sign the same.
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