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

Ms. Iyer's broker offers a Power of Attorney (PoA) arrangement. Under current SEBI-linked requirements, which use of the PoA is permitted for the broker?

The broker may use the PoA only for purposes linked to the client's own dealings, such as delivering the client's securities to meet that client's settlement obligations. Using client assets for proprietary use, expenses or unauthorised pledges is prohibited.

  1. ATransferring client securities to the broker's own account for proprietary use
  2. BPledging client securities to any third party without any client consent
  3. CUsing client securities to meet only that client's settlement obligations, as per the exchange's allowed purposeCorrect
  4. DWithdrawing client funds from the bank account for the broker's expenses

Explanation

The PoA is restricted to purposes tied to the client's own transactions, such as delivering securities for that client's settlement obligations. Moving assets to the broker's own account, using funds for the broker's expenses, or unconsented third-party pledges are misuse of client assets.

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