Power of Attorney is a legal record that gives legal authority to an individual to operate your account on your behalf as per the instructions specified in the document.
Types of PoA
Specific PoA: This gives a single or limited range of powers to the person to whom the PoA has been granted. NSE advise investors to give specific PoA to stockbrokers which is restricted to the usage of the Power of Attorney to transfer securities for margin purposes or the settlement of trades done through a recognised stock exchange.
General PoA: It authorises the Power of attorney holder to carry out all activities. NSE advice against this for purposes of dealing within the securities market.
In whose favour the PoA should be given?
If you do decide to give PoA for convenience, make sure it is in the name of only SEBI registered stockbroker and not in the name of the dealer, an employee, associate entities, etc.
What should the period of PoA be?
PoA should be issued for a restricted period and should never be left open-ended in the hand of your broker or family member. The period of PoA must be clearly specified. The choice of renewal should remain in your hands based on how PoA has been put to use.
Ensure that the right for cancellation is affirmed in the PoA.
Specific PoA Do’s and Don’ts
As per NSE’s booklet on Power Of Attorney:
• Give solely specific PoA.
• Specify the time period for which PoA is given.
• Confirm the existence of the revocation clause.
• Retain control by insisting that you get contract notes, statement of account and Demat transaction receipt at your address.
• Do not approve opening or closing of accounts using PoA.
• Do not sanction off-market transactions other than for margin purposes.
• Do not sanction investment decisions and placing of orders using PoA.
• Do not authorise the transfer of funds/securities to account other than trading members’ Pool Account of Client Margin Account.
Should the account solely be operated by PoA holder?
You hold the full right to operate your account, and the PoA is only an authorisation given by you to manage your account on your behalf.
In a PoA to a stockbroker, take special care that:
•You have got retained the powers to make your investment decisions on when you wish to buy or sell securities and not now authorise this to the PoA holder.
•You must retain the rights to receive complete information regarding transactions and account directly. Ensure the right to such information does not just lie with the Power of Attorney holder.
•You have admitted to use securities, and your funds for your own use exclusively and not allow the broker to use it for their monetary needs or the purposes of their other clients.
•You have retained the right to open or close account only with you.
•The PoA must be in the name of the SEBI registered stockbroker and not in the name of any other person or another entity.
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