Equity brokers may no longer be able to misuse client shares lying in demat accounts. From June 1, SEBI has discontinued the use of Power of Attorney (PoA) between a client and broker in the equity markets. This is the first major step that the regulator has taken after the multi-crore default by Karvy Stock Broking through misuse of PoA.
PoA is a legal document that confers a broker with the right to handle client shares. The document is collected by brokers when they open demat accounts for their clients. Brokers transfer client shares in their collateral pool account by using the PoA under the guise of collecting margins. Such shares are then re-pledged by Karvy and many other brokers to avail of loan from banks.
Brokers have been urging SEBI to disallow clients from giving them shares as margin for trading in derivatives. The regulator had said it was a global protocol. Now, the clients will themselves have to transfer shares to the margin account if they wish to pledge them.
Revisiting arrangements
Several PoA arrangements will have to be reversed and the entire process of margin placement of shares to brokers will have to be re-done, said Vijay Bhushan, broker NSE and BSE.
“Holding of a PoA by broker will not to be considered as equivalent to the collection of margin,” SEBI said in its circular.
In the derivative segment, brokers collected shares as margin from traders by using the PoA and there was no specific written communication involved. Now, clients will have to give specific instructions to brokers for transfer of shares for the sake of margin.
Thank you for being a loyal user of Portfolio.
Portfolio will be a paid section hereon.
Please Subscribe to get access to one of our early bird packs.
Or click on Free Trial to get 14 days free trial.
What You'll Get
-
Web + Mobile
Access exclusive content of the Hindu Businessline across desktops, tablet and mobile device.
-
Exclusive Portfolio and Investment Advice, Banking, Lifestyle and Specials
Get diverse set of perspectives from our trusted experts on Portfolio, Banking, Economy, Environment and others.
-
Ad free experience
Experience cleaner site with zero ads and faster load times.
-
Personalised dashboard
Customize your preference and get a personalized recommendation of stories based on your interest.
Published on
May 25, 2020
A letter from the Editor
Dear Readers,
The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.
Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.
In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.
We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.
But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.
I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.
A little help from you can make a huge difference to the cause of quality journalism!
Sincerely,
Support Quality Journalism