As per the leading business dailies report, soon after the debacle at Karvy's stock broking, broking firms will be in for a chaos as they no longer will be given the privilege to use the clients' power of attorney. Through access to PoA of client, like as in the case of Kavy Stock broking, brokers have access to customer's demat details which can be put to misuse.
Further, the power of attorney shall only be allowed for settlement purpose and not for the purpose of collateral and this way the clients' can have a watch over their holdings in the demat account, said a person who was cited in the report.
Nonetheless, if the customer defaults, brokers without pre-informing them can invoke the pledged shares. Further the report said that SEBI shall soon implement the proposal soon.
In the recent Karvy case debacle, the company through illegal means transferred client's pledged shares with banking and NBFC clients for raising money which was then transferred to other busineses.