SEBI cautions brokers on misuse of power of attorneys

Market regulator Securities and Exchange Board of India (SEBI) is keeping a close watch on rising investor complaints on the misuse of Power of Attorney (PoA) by brokers. The industry watchdog has put out a discussion paper and will be issuing guidelines to address the issues of unauthorised trades and misappropriation of funds. CNBC-TV18's Priyal Guliani reports.

SEBI has put out a discussion paper and has proposed that a specific PoA should be executed which basically limits the usage of the PoA. The transfer of securities held in the clients account should be for the limited use of margin and delivery obligation. Also, the usage of the funds from the client's bank account should be limited for the usage of settlement obligation.

MS Sahoo, Whole Time Member of SEBI says SEBI is currently under a discussion stage and is are planning to come out with a guideline, which will have many dos and don'ts. "It will put obligations on the brokers and depository participants to be responsible for the use of PoAs."

Other than that what SEBI is proposing is that the broker and the depository participants shall provide an original copy to the client after the execution and send SMS alerts on any transactions to the client. Also, there will be a clause included with regard to the settlement of disputes in the PoA.