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

Mr. Iyer's broker offers a Power of Attorney (PoA) arrangement. Under SEBI's current framework, for which purpose may the PoA granted to a broker be used?

A PoA given to a broker can be used only for specified purposes, such as pledging securities with the clearing corporation as margin and delivering securities for settling the client's own trades. It cannot be used to move funds or securities to the broker's own account.

  1. APledging securities to the clearing corporation for margin and settling obligations, as per specific permitted purposesCorrect
  2. BWithdrawing cash from the client's bank account for the broker's own dues
  3. CTransferring securities to the broker's proprietary account
  4. DTransferring securities to any third party chosen by the broker

Explanation

SEBI limits the use of PoA to permitted purposes such as pledging or re-pledging securities for margins in favour of the clearing corporation and delivering securities for settlement of the client's own trades. It cannot be used to move funds or securities to the broker's own account or third parties for the broker's benefit.

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