SEBI issued the Guidelines for execution of Power of Attorney by Clients favouring Stock Brokers /Stock Broker and Depository Participants

SEBI Issued the guidelines on Friday, 23rd April 2010 regarding POA excuted in favour of Brokes/DP by clients . The key points of the guidelings are as follows:

Guidelines for execution of Power of Attorney by Clients favouring Stock Brokers / Stock Broker and Depository Participants

 PoA favouring Stock Brokers

 PoA executed in favour of a Stock Broker by the client should be limited to the following: 

1. Securities

  i.    Transfer of securities held in the beneficial owner account(s) of the client(s) towards stock exchange related margin / delivery obligations arising out of trades executed by the Client(s) on the stock exchange through the same Stock Broker.

  ii.    Pledge the securities in favour of Stock Broker for the limited purpose of meeting the margin requirements of the client(s) in connection with the trades executed by the clients on the stock exchange through the same Stock Broker. Necessary audit trail should be available with the Stock Broker for such transactions.

iii. To apply for various products like Mutual Funds, Public Issues (shares as well as debentures), rights, offer of shares, tendering shares in open offers etc. pursuant to the instructions of the Client(s). However, a proper audit trail should be maintained by the Stock Broker to prove that the necessary application/act was made/done pursuant to receipt of instruction from Client. 

2. Funds

1. Transfer of funds from the bank account(s) of the clients for the following:

a)      for meeting the settlement obligations of the client(s)/ margin requirements of the client(s) in connection with the trades executed by the clients on the stock exchange through the same Stock Broker.

b)      For recovering any outstanding amount due from the client(s) arising out of clients trading activities on the stock exchanges through the same Stock Broker.

c)     For meeting obligations arising out of the client subscribing to such other products/facilities/services through the Stock Broker like Mutual Funds, Public Issues (shares as well as debentures), rights, offer of shares in etc.

d)     Towards monies/fees/charges, etc. due to the Stock Broker/Depository Participant/ Principal payable by virtue of the client using/subscribing to any of the facilities/services availed by the Client at his/her instance. 

Necessary audit trail should be available with the Stock Broker for such transactions. 

POA favouring Stock Brokers and Depository Participants

 PoA executed in favour of a Stock Broker and Depository Participant by the client should: 

1. identify/provide the particulars of the beneficial owner account(s) and the bank account(s) of the client(s) that the Stock Broker is entitled to operate.
2. provide the list of clients’ & brokers’ Bank accounts & demat accounts where funds and securities can be moved. Such bank & demat accounts should be accounts of related party only.
3. be executed in the name of the concerned SEBI registered entity only and not in the name of any employee or representative of the Stock Broker/Depository Participant.
4. not provide the authority to transfer the rights in favour of any assignees of the Stock Broker/Depository Participant.
5. be executed and stamped as per the rules / law prevailing in the place where the PoA is executed or the place where the PoA is kept as a record, as applicable.
6. contain a clause by which the Stock Broker would return to the client(s), the securities or fund that may have been received by it erroneously or those securities or fund that it was not entitled to receive from the client(s).
7. be revocable at any time, without notice.
8. be executed by all the joint holders (in case of a demat account held jointly). If the constitution of the account is changed for whatever reason, a new PoA should be executed.
9. authorize the Stock Broker/Depository Participant to send consolidated summary of Client's scrip-wise buy and sell positions taken with average rates to the client by way of SMS / email on a daily basis, notwithstanding any other document to be disseminated as specified by SEBI from time to time. 

General Guidelines 

The POA shall not facilitate the stock broker to do the following:

1. Transfer of securities for off market trades.
2. Transfer of funds from the bank account(s) of the Clients for trades executed by the clients through another stock broker.
3. Open a broking / trading facility with any stock broker or for opening a Beneficial Owner account with any Depository Participant.
4. Execute trades in the name of the client(s) without the client(s) consent.
5. Prohibit issue of Delivery Instruction Slips (DIS) to beneficial owner (client).
6. Prohibit client(s) from operating the account.
7. Merging of balances (dues) under various accounts to nullify debit in any other account.
8. 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.
9. 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. 

Stock Broker / Depository Participant should ensure that:

1. A duplicate/ certified true copy of the PoA is provided to the Client(s) after execution.
2. In case of merger/ demerger of the Stock Broker/Depository Participant with another entity/ into another entity, the scheme of merger/ demerger should be approved by High Court and one month prior intimation given to the client about the corporate restructuring to facilitate investor/ client to continue or discontinue with the broker.

Editor