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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A client wants to give a power of attorney (PoA) to the broker. Which practice is consistent with SEBI's requirements?

A PoA may be taken only for limited, specified purposes linked to the client's own settlement and margin obligations, and it cannot be made mandatory for opening an account. The broker cannot use it to move funds for itself or to trade without client orders.

  1. AThe PoA can be used only for specified purposes such as settlement of trades, and the client must be given a statement of useCorrect
  2. BThe PoA can be used for any purpose, including transferring funds to the broker's own accounts
  3. CThe PoA must be made compulsory for opening any trading account
  4. DThe PoA allows the broker to trade without client orders

Explanation

SEBI has stopped brokers from making PoA compulsory and limits its use to defined purposes such as pledging or settlement-related transfers for the client's own obligations. Misuse such as moving funds to the broker's own accounts or trading without orders is not permitted.

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