What is power of attorney(POA)? ~ stock market

Definition :

Power of Attorney is nothing but an one type of legal document which allows a broker to trade freely through your Demat account. This document gives the broker the authority to buy or sell your share on your behalf. Now, if you want to trade online, you can give permission to broker to buy and sell shares.

Let’s understand it with an example that I wanted to share of SBI from my gmail account I have to authorize my broker that broker you're allowed to take away shares take out shares for my be might account and then process the transaction.

What is main purpose of POA?

If you have trade in equity delivery, then you have almost opened two account like
1) Trading account
2) Demat account

Trading account is an account that you buy and sell share through this account. And Demat account is the account that keep your all share in electronic form.

If you want to sell your sell, then your broker need to permission for taking out shares from your Demat account. In this situation the roll of POA comes in, that you give permission to your broker that the broker allow to take out of your share.

It is a normal to provide Power of Attorney to your broker who can execute a trade on your behalf over the phone or even square off positions in your account if there is a requirement for margins.

Giving POA doesn’t mean all your wealth is now with the stock broker and he can kick you out from where you live. It only happens in movies or tv serials.

If there any way that you don’t want to give POA and also you want to sell your shares?

Yes, there are two way to sell your share without giving POA.

1. Delivery Instruction Slip(DIS)

In DIS you have to fill form and sign it and give it physically to your stock broker office every time when you sell your share. It’s also you can call one type of cheque.

2. Electronic Delivery Instruction Slip(E-DIS)

In E-DIS type you don’t have to go your broker’s office physically and fill form and sign it. In this type whenever you want to sell your share then you want press sell button on your broker’s application and then one OTP sent to your registered mobile number and after receiving OTP you have to enter it and after entering right your OTP your share are placed for sell.

In E-DIS the maximum limit of sell your share value is 20 lakh rupees. Above 20 lakh rupees transaction you have to fill your POA and send it to your broker’s office through post.

If you give POA then what things you want to keep in mind?

1. Your mobile number and E-mail id must linked with both stock exchange NSE and BSE.

2. Frequently check your E-mail and message after placing order.

3. Most of the time misuse of POA never happned, but accidently when it happened you have to right to complaint to SEBI.

Securities and Exchange Board of India (SEBI) is a statutory regulatory body entrusted with the responsibility to regulate the Indian capital markets. It monitors and regulates the securities market and protects the interests of the investors by enforcing certain rules and regulations.

Thank You.

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