DEFINITION of power of attorney (POA)
Power of attorney (POA) gives another person (the agent or attorney-in-fact) the ability to act on your behalf. In trading, this means they can take over your trading accounts.
WHAT IT IS IN ESSENCE
The full power of attorney is used in the event that you are disabled in some way and need someone else to take over your complete financial business.
Limited power of attorney is used by portfolio managers and brokers to perform certain actions on their client’s behalf. Those actions can be making trades, authorizing payments and withdrawals, and acting as a proxy on some documentation.
After going through the SEBI Circular dated April 23rd, 2010 and aftermath clarification about few doubts on the said circular dated Dec 30th, 2010 indicates that POA is mandatory only for online accounts but not to offline accounts.
But POA isn’t responsible for transfer securities for off-market trades but other than the parties mentioned in POA.
Nor for transfer of the fund from the client’s bank account for the trades executed by the client through another stockbroker.
Or for opening a trading account with any stock broker or opening depository account with any other depository.
This service cannot execute trades without the client’s consent.
HOW TO USE
It is mandatory is for your Demat Account. Most of the brokers or your trading account provider will tell you to provide some. And appoint them as the lawful attorney of your Demat Account.
The facility of it is available to clients for the timely delivery of shares and the paying in or paying out of funds via instructions given to the broker/depository participant on a legal document.
This third person or service is not a mandatory requirement for opening and operating a trading account. It is only for the online 3-in-1 trading accounts and must conform to Sebi’s guidelines to prevent its misuse.
This person should carry the details of the bank and the demat account of the client, to which the broker may have access.