Power of Attorney for Demat Account & Why It Is Important

A Power of Attorney is a document given at the time of opening a demat account which is widely misunderstood by retail investors. To start, I would remind you that demat account is used as a safe to hold shares electronically. Power of Attorney is a part of documentation when you open a demat account with us just as any other stockbroker in India.

What Power of Attorney means:

Power of attorney (PoA) is a document giving legal authority to your stockbroker (Fyers) to operate your account as per instructions contained in it. Every time you sell shares, we use the power of attorney to debit the shares from your demat account and provide it to the exchange. Power of attorney is also used to debit shares from your demat account when you intend to pledge them to get collateral margin for trading futures and options.

Power of Attorney – Mandatory or Optional?

Power of attorney is not a mandatory document. SEBI or exchange does not specify that it is essential for the investors to trade. You as an investor have the choice of deciding whether to give it or not. However, power of attorney is required for smooth functioning of a demat account.

If it is not signed by the client, he can show his consent by issuing a Delivery Instruction Slip (DIS) which is similar to a bank’s cheque leaf that serves as an authority to sell shares/transfer shares from one demat account to another demat account. I must add that doing work through delivery instructions slips is unnecessary and you could end up wasting a lot of time in the process. Make sure that the POA is in the name of the stockbroking firm only and not any individual who act on their behalf. The Power of Attorney can be left open-ended since it is specific to your demat account and the powers are clearly mentioned within. You could do it for a limited time-frame but it is not recommended as it limits the service providers the ability to give you a hassle-free experience.

Delivery instruction Slips (DIS) is not widely used today due to the amount of time it takes to process a simple electronic transaction. Similar to bank cheques, they are getting phased out. They are issued by Depository Participants (DPs) when you open a demat account with them. Below is a sample screenshot of Delivery Instruction Slips which are used to to sell/transfer physical shares:

Delivery Instruction Slip Fyers

Below are the few actions what we would do on behalf of you if you sign a power of attorney with us:

1. Securities

• When a client raise a request to sell shares, we transfer the securities to stock exchange & from there the buying party/broker would take the delivery of the same
• To pledge securities in our favor for a limited period to meet the margin requirement of the trade executed by the client.
• To apply for various products like Mutual Funds, Public Issues, rights, offer of shares etc. based on the client instructions which also includes redemption.

2. Funds-Transfer of funds from client’s bank account in the following cases

• For meeting settlement obligations and margin requirements for the trade executed by client on stock exchange.
• For recovering outstanding dues arising out of the client’s trading activity on the stock exchange.
• For meeting other obligations of client’s subscription to products such as mutual funds, public issues, rights or offer of shares etc.
• For any dues pending as a fee or charges towards maintaining DP account.

Going by the terminologies, at first instance although it seems as though you are giving “full” control to manage both demat account & funds in bank account, it is not true. Don’t worry, even though we mentioned full control, there are different types of POA’s using which one can limit the control handed over which I have explained below.

Types of Power of attorneys executed in India:

1. General – The holder of POA can perform all the activities on behalf of the original holder(s). A general Power of Attorney has wide ranging powers and is not appropriate when applied to the stock markets. Usually such Power of attorneys are held by the children of an ageing person to exercise powers who is either ill or incapacitated for whatsoever reason.

2. Specific/Limited – The holder of PoA can perform only certain operations as specified in the PoA document.

We at Fyers partnered with IL&FS only ask for specific Power of Attorney. Please make sure that you sign a Power of Attorney in the name of SEBI registered stock broker like us. If you want to experience a seamlessly fast & reliable service, sign up with us here.

Some features of Power for Attorney of Demat Account (FYERS):
• We are tied up with IL&FS for demat accounts.
• It does not authorize investment decision
• It does not authorize placing of orders without consent.
• It does not authorize transfer of securities/funds other than the concerned Trading members pool accounts, Margin accounts and other such accounts.
• It cannot be given on behalf of family members. Family members who have an account will need to give an authorization themselves.
• If there is a margin shortfall by you, the Power of Attorney holder can exercise the authority mentioned to recover dues from you. This can be done by disposing securities to the extent required.
• You can always continue to operate your account in spite of giving Power of attorney.
• You can revoke the POA by following the necessary procedure. Do get in touch with us for more information.

How you can track activities in your demat account:

a. You can your contract notes which are sent to you at the end of the day to your e-mail.
b. You can go through the Statement of Accounts which is sent to you by e-mail.
c. You can verify by checking quarterly settlement statements of funds and securities.
d. You can write to us at any time seeking clarification to support@fyers.in

Summary:

1. In the absence of Power of Attorney, a client shall sign a delivery instruction slip to sell his/her shares from demat account. (Not recommended)
2. To trade futures and options or intraday equity, there is no requirement of Power of Attorney
3. It is required for smooth functioning of demat account.

Note: Although Power of Attorney is not mandatory, as a modern stockbroker we recommend it especially considering its limited powers & hassle-free mechanism which follows. Feel free to clarify your doubts in the comments section below. Hope you found this useful.

Tejas Khoday

Tejas Khoday

Tejas is the Co-Founder & CEO @ www.fyers.in, the youngest team to get NSE’s broker license. FYERS was started as a mission to enhance the terrain for traders and investors in India. He previously worked at Zerodha, Futures First & has been a professional trader for several years.

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Showing 19 comments
  • Vinay
    Reply

    If i link Kotak Mahindra Securities demat account, will I be able to buy & sell shares through Fyers trading account?

  • Krishnan
    Reply

    Is there any POA Charges?

  • Radha
    Reply

    POA is required or not to link existing demat to Fyers trading A/c?

  • Sidhart
    Reply

    Is it possible to transfer shares from one Demat to another using POA?

  • Ashokkumar
    Reply

    Can POA be misused?

  • Ashokkumar
    Reply

    How many days will it take to activate POA for demat?

  • Prasad
    Reply

    When they’ll deduct the dp charges after selling my holdings?

  • krishna
    Reply

    Does Fyers has tei-up with other Demat account?

  • Ravi
    Reply

    I have linked HDFC demat account while opening trading account . Can i change my Demat now?

  • BigAlphatrade!
    Reply

    People in India don’t have basic knowledge also. But you made it simple and still.. POA is needed for smooth functioning guys.

  • Tejas Khoday
    Reply

    The POA will take 2 more days after the demat account has been activated. This is due to internal process that needs to be followed by IL&FS.

  • Tejas Khoday
    Reply

    No Ashok, as mentioned in the post this POA is only specific to your demat account and has limited scope.

  • Tejas Khoday
    Reply

    Yes it is. In fact, that is the main purpose. But it is important to understand the underlying intent is to make things hassle-free for clients. It is far more efficient that opting for Deliver Instruction Slips to transact from time to time.

  • Tejas Khoday
    Reply

    No that’s not required. Keep in mind that by linking your existing demat account with fyers, you will not be able to sell the holdings through us. To sell you will have to do it through you other stockbroker. Honestly, its much more convenient to open a new demat account through us. It makes things easier.

  • Tejas Khoday
    Reply

    You will be able to buy stocks which will get delivered into your Kotak Account, but you can only sell through Kotak. Better to open a new demat account to avoid such hassles.

  • Tejas Khoday
    Reply

    No, there are no POA charges as such.

  • Tejas Khoday
    Reply

    Yes Prasad.

  • Tejas Khoday
    Reply

    No Krishna, we are exclusively tied up with IL&FS.

  • Tejas Khoday
    Reply

    Yes, you can link it to IL&FS demat account. It makes things easy.

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