Discussion Paper on guidelines for execution of Power of Attorney by clients favoring Stock Brokers/Depository

SEBI has put out on its website a discussion paper on the guidelines for incorporating conditions/clauses in the Power of Attorney (PoA) given by clients to their Stock Brokers and/or Depository Participants in the context of possible risks for the clients in this regard. The proposed guidelines for execution of PoA by clients favoring Stock Brokers/Depository will be open for comments from the public till November 30, 2009.

It should be noted in this context that the misuse of client’s funds by brokers are troubling the regulators in India as well as worldwide. Earlier this year, NSDL (the largest depository in India)made ‘SMS alerts’ (alerts sent by way of SMS from the depository to the client whenever a debit or credit happens in the account of the client) mandatory for all accounts operated through a PoA. This was aimed at preventing the broker from making unauthorized credits or debits from the client’s account. As a part of its efforts to create awareness among the investors, National Stock Exchange (NSE) also started an education series on the importance of Power of Attorney, last month. These advertisements appeared in major business newspapers.

A copy of the Discussion paper is available here.