Is it safe to give Power of Attorney to your broker to operate demat a/c?

Biker

Active Member
#1
I am about to open a new trading account with a broker and see that there is a form of PoA in nearly all account opening filling forms.

Is this a norm? Is it safe? If I give PoA to broker then he can debit my shares whenever he wants!
 

cloudTrader

Well-Known Member
#3
I am about to open a new trading account with a broker and see that there is a form of PoA in nearly all account opening filling forms.

Is this a norm? Is it safe? If I give PoA to broker then he can debit my shares whenever he wants!
The broker works as a middleman between you & exchange . For buying / selling the shares for you on your instruction the broker needs the authority to execute trades . For this authority the need arises for the PoA. Reputed brokers will never misuse this PoA.

Only fraud brokers can misuse this PoA. So choose your broker carefully.
 

Biker

Active Member
#4
Thanks Shelly and Leonid for your inputs. I think PoA is reason of all unauthorised trades. Agreed that it would be little pain to transfer shares everytime, but there will be peace of mind.

It would not matter for those doing trading but for investors (like me) who has stocks worth few lacs, I feel PoA can becomes risky. The problem is the dealers/relationship managers are paid employees with pressure to achieve the targets. So in order to save job they start doing all kind malpractices.

Also I think NSDL has started facility of online share transfer. I dont know much in detail and am in process of doing more research, but if something like becomes possible then it would reduce the paperwork to some extent.
 
#5
What are the advantages and disadvantages of giving vs not giving the PoA to brokers? I am new to trading so please, someone explain in simple words. Thank you.
 
#6
Answer: Nowadays Online Trading is very common so, one should have to give some kind of authority to his broker to trade easily and faster. The whole criteria of POA revolves around the customer will now. It quiet safe now because of SEBI rules and regulations.

"According to 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."
One should issue specific and revocable POA to his broker for his protection and safety, because its rightly said precaution is better than cure.
POA is applicable only to Demat Account and on other equity and future option its optional not compulsory ,its the sole discretion of customer not the broker.
Nobody can sell shares without consent of customer if you didn't give POA to Demat Account issuing company one should give Delivery instruction slip(DIS) every time you sell shares to transfer it to any other company to the broker but take huge time , so its better to issue Specific POA with clause and revocable .
One should go through this article for better understanding.
http://articles.economictimes.indiatimes.com/2011-07-11/news/29761256_1_stock-broker-poa-transaction
 
#8
I am about to open a new trading account with a broker and see that there is a form of PoA in nearly all account opening filling forms.

Is this a norm? Is it safe? If I give PoA to broker then he can debit my shares whenever he wants!
Hello,
There goes a saying “ You should never ask a barber whether you need a haircut”. Your demat account is highly secure and regulated account similar to your bank account. So as you are new to trading so be careful in each and every step you take in to this. Don’t go with people suggestions, just think, research well and then start your trading. As per SEBI's rules, brokers can't force clients to sign the POA. Power of Attorney is not mandatory for opening a trading account with member of Stock Exchange. SEBI or Exchanges does not specify that PoA is essential for the investors to trade. Its purely your choice, if you give that to your broker then you should know do so only after fully understanding the risk associated therein. It’s a very crucial decision, so be very careful, choose broker WISELY. Open an account with firms which are SEBI registered. In case if you are giving this then make sure you are receiving your transcation information such as contract notes, margin statements and statements of funds and securities. Review your bank and demat account statement daily about the movement of funds and securities. As it is rightly said “an ounce of prevention is worth a pound of cure”.
Have a nice trading :) :)