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

Which of the following best describes a 'Power of Attorney' (POA) given by a client to a broker in the current framework?

A power of attorney in favour of a broker is optional and restricted to specified purposes such as settlement obligations and margin pledge related transfers. It does not make it mandatory to trade, give discretion to trade, or transfer ownership of the client's securities.

  1. AIt is optional and limited to specified purposes such as settlement obligations and pledge or margin related transfersCorrect
  2. BIt is mandatory for all clients before they can trade
  3. CIt allows the broker to trade at its discretion in the client's account
  4. DIt transfers ownership of the client's demat holdings to the broker

Explanation

SEBI made POA optional and purpose-limited, such as meeting pay-in obligations and margin pledging or re-pledging. It does not give discretion to trade or transfer ownership, and clients cannot be forced to sign it.

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