Do away with power of attorney from clients, says Sebi
Regulator says guidelines issued after consultation with stakeholders
Market regulator Sebi, on Saturday, asked brokers not to refuse services to investors in case they fail to furnish power of attorney in favour of them.
Power of attorney (PoA) is a legal arrangement that allows brokers to access bank and demat accounts of their clients.
“No stock broker or depository participants shall deny services to a client if the client refuses to execute a PoA in their favour,” Sebi said in its new PoA guidelines. The guidelines, issued after consultation with various stakeholders, further said brokers will be prohibited from using clients account for off-market trade.
Sebi came out with the guidelines in view of complaints of misuse of PoA by brokers. “In some cases, the PoA even allows a broker to open and close accounts on behalf of client and to trade on client’s accounts without the consent of clients,” it said. Commenting on the guidelines, SMC Capitals equity head Jagannadham Thunuguntla said, “this will help in seamless integration and more transparency for usage of PoA and to provide any misuse.”
Steps for implementation
Sebi said brokers should take necessary steps to implement it by May 31 for new clients and ensure to take necessary steps by September 1 to revoke those authorisation given by the existing clients to the brokers.
In case of merger or demerger of the stock broker with another entity, the scheme of merger or demerger should be approved by a high court and one month prior intimation given to client about the corporate restructuring to facilitate investors to continue to discontinue with the broker.
