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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 stock broker a power of attorney (PoA) to operate the demat account. Under current SEBI norms, which is correct about the use of PoA by the broker?

The PoA may be used only for permitted purposes such as meeting the client's settlement obligations, not for freely transferring securities. Brokers cannot make it mandatory to open an account, and it gives no right to withdraw funds from the client's bank account.

  1. AIt must not be used to transfer client securities except for settlement obligations or specified purposesCorrect
  2. BIt allows the broker to transfer securities to its own account freely
  3. CIt is mandatory for every client to execute a PoA to open a trading account
  4. DIt allows the broker to withdraw funds from the client's bank account

Explanation

SEBI restricts PoA use: the broker cannot make it mandatory for opening an account, and it may be used only for specified purposes such as settlement obligations and margin pledge-related actions. Free transfers to the broker's own account or bank withdrawals are not permitted.

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