The power of attorney on Demat accounts allows your broker to operate your Demat account on your behalf without you having to authorize them for each transaction you make. The power of attorney (POA) for the Demat account for the broker is a legal document. It grants limited or full legal authority to the broker to operate your Demat account under the terms agreed to in the PoA document signed by you. The power of attorney is not a mandatory document.
SEBI or exchange does not specify that it is essential for investors to trade. You, as an investor, have the option of deciding whether to give it or not. However, a power of attorney is required for the proper functioning of a Demat account. It is the most dangerous and very abused power of attorney and therefore this type of POA should never be executed, not only for the Demat account but also for anything else in life, unless it is justified.
There is a lot of confusion and apprehension in India regarding this dreaded document called Power of Attorney (POA). Signing a power of attorney is not required and no broker can deny you services if you do not want to grant you a power of attorney. A power of attorney is a letter of authorization that allows a person to represent or act on behalf of another person. A power of attorney is a document given at the time of opening a Demat account that is widely misunderstood by retail investors.
Power of Attorney is a part of the documentation when you open a Demat account with us just like any other stockbroker in India. In addition to the smooth and hassle-free operation of the demat account, you as a customer will get many benefits, such as. The general power of attorney authorizes the person to perform all general activities on behalf of the original holder. POA is a document that allows a broker to load sold shares from a demat account for delivery to the exchange.
According to SEBI, after the execution of the KYC document, the broker must deliver a copy of all documents. Due to regulatory measures taken by SEBI, the extent of damages due to improper use of power of attorney is greatly reduced. So, for all these reasons, the POA is usually issued in favor of the broker so that you can debit the shares from your demat account without DIS when you sell them online. Almost all investors who open the Trading and Demat account for delivery-based trading give a limited POA to the broker.