Be Careful in Power of Attorney Execution with Stock Brokers: NSE to Investors

New Delhi: The National Stock Exchange on Monday advised investors to be careful when executing a power of attorney (PoA) with securities brokers and to spell out any rights brokers can exercise on their behalf.

The latest communication comes in the context of the unauthorized transfer of securities worth Karvy Stock Broking Ltd 2,300 crores from more than 95,000 customers, on his account, by abusing the PoA granted by his customers.

On November 22, Sebi banned Karvy from taking on new clients in its stock brokerage business and also blocked it from using the PoA given by clients after it was discovered that the broker had allegedly abused clients’ credentials.

The main exchange asked investors to “be careful when executing the PoA (power of attorney) – to specify all the rights that the securities broker can exercise and the period during which the PoA is valid”.

In addition, investors were advised to register for online applications provided by custodians for online delivery of securities as an alternative to PoA.

The PoA is not a mandatory requirement according to market regulator Sebi or exchanges, he noted.

According to the NSE, investors should ensure that contract memos are received within 24 hours of trades and account statements at least quarterly from brokers.

Warning investors against keeping idle funds and securities with a broker, the exchange said the securities they supply to margin should not be allowed to be pledged by brokers for raise funds.

“If investors have opted for a checking account, please ensure that the stockbroker settles your account regularly and in any case no later than 90 days (or 30 days if you have opted for 30-day settlement)” , the exchange said.

In addition, investors were advised to log into their accounts on a regular basis to check balances and demat statements received from custodians as well as to check messages sent by exchanges on a monthly basis regarding fund and securities balances reported by the business member.

In the event of a discrepancy, investors should immediately raise concerns about it, the exchange said.

Also, investors should keep their contact details – mobile phone number and email id – up to date with the broker and raise the matter with the broker or exchanges in case they do not receive regular messages from exchanges or custodians, he added.

This story was published from a news feed with no text edits. Only the title has been changed.

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Dolores W. Simon