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rivu

New Member
#1
Power corrupts. History is replete with excesses of those who control the strings of power. The market too has seen its share of abuse from unscrupulous brokers and influential investors. Sure, an electronic trading system and tighter rules have made it safer for investors, but the threat of an errant broker abusing an article of faith always lingers. One aspect of trading that offers such a possibility is the power of attorney (PoA) given by investors to a broker.
Powershift. When you sell shares, you have to ask your depository participant (DP) to move those shares from your demat account to your broker's demat account. For this, you have to give your DP a signed delivery instruction slip. Unless your DP is a stone's throw away, it can be irritating going down to its office to deliver a piece of paper each time you sell shares.

Some brokers offer you a way out of this travel. For a nominal fee (about Rs 100 a year), they offer to submit your slips to your DP on your behalf. You need to give them an authorisationthe PoAto operate your demat account.

Dos and don'ts. But before you call up your broker to draw up a PoA, take some safeguards to ensure you don't end up arming him with powers to fiddle with your holdings or, worse, clean up your demat account. Says Satish Menon, chief operating officer, Geojit Financial: "The PoA should be valid only for trades executed through the broker to whom you have given this authorisation. It shouldn't apply to off-market transactions or trades done through other brokers." In other words, give your broker limited authorisation.

The 'one broker' clause makes your broker accountable and gives him less room to get away with fraud. For transferring your shares to his account, he will have to furnish details of the trade done by you. Even if he effects a transfer on a trade not done by you, intentionally or unintentionally, you can haul him up. You can use the audit trail to prove that the trade in question wasn't done by you.

But if the PoA is applicable to all kinds of trades, your broker can feign ignorance of shares disappearing from your demat account on the grounds that the trade wasn't done through him. Sure, an audit trail can be applied to off-market transactions and those done through other brokers also, but it'll cost you time and money, and test your patience. So, play it safe, and stick to the 'one broker' clause. As it is, it's likely you won't be doing many off-market transactions or going through other brokers.

With offline brokers, you can tailor your PoA. Not so with online brokers. In Net trading, a PoA is mandatory, as both shares and money are transferred onlineand it's non-negotiable. In fact, the PoA drafted by the two leading Net trading players, ICICI Web Trade and HDFC Securities, is loaded against you, as it gives them complete access to your demat account, including to securities other than shares. This blanket authorisation might be a cause for worry, but it is, to a large extent, compensated by the immaculate pedigree of these entities. A small broker might not inspire the same confidence, and therefore you should be careful with what the PoA you give him allows.



Snapshot
If you don't want to deliver instruction orders to your DP...
Give your broker a power of attorney to access your demat account. But with safeguards.
Submit the instruction order through NSDL/CDSL sites, if your DP has signed up for this facility.

Go online. If you find the worst-case consequences of handing your broker a PoA unsettling, do it yourself. Some help, though, is on hand from the two depositories, NSDL and CDSL, which let you submit delivery instruction orders through their websites. The NSDL facility, SPEED-e, is currently offered by 30 DPs, while the CDSL facility, Easiest, is subscribed to by 47 DPs; more DPs are expected to link up. DPs offer this facility at the same cost as a PoAtypically, Rs 100 a year.
 

rivu

New Member
#2
CDSL Easiest is better than Speed-e, because its 128 bit SSL through Verisgn and digital certificate is require (e-token)for any offmarket transaction. You need to put the password & e-token didgital sign for any transfer.
CDSL "Virtual DP" cpncept is unique for small CM, who dont want to run their own DP.
PoA link is new & better concept.
 

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