Brokers Cannot Use PoA As Margin Equivalent From 1 June

In a recent circular issued this week, the Securities and Exchange Board of India (SEBI) confirmed that brokers cannot use the Power of Attorney (PoA) obtained from clients on shares in the demat accounts as an equivalent for trade margins from 1 June.

The rule is part of the market regulator's 25 February circular on restrictions of use of PoA. However, SEBI extended the implementation of other rules in the circular over the next three months in the wake of the disruptions on account of the COVID-19 pandemic.

After the Karvy Stock Broking crisis, SEBI introduced restrictions to curb the misuse of PoA. In February it said margin obligations to be given in the form of securities by client should be by way of pledge or re-pledge in the depository system. It also said title transfer of securities to client collateral demat account of the trading member for margin purposes would not be permitted.