Sebi proposes power of attorney norms for St
Suggests it provide way for settlement of dispute

Sachin P Mampatta. Mumbai
Everyone who has invested in the market for a while would have heard horror stories of rogue brokers and depository participants who misused client funds or made transactions without their permission. The market regulator has now proposed new guidelines that may make such incidents a thing of the past.
The Securities and Exchange Board of India (Sebi) on Tuesday released a discussion paper on the execution of Power of Attorney (PoA) by stock brokers and depository participants, to stop transactions which might take place without the investor's permission.
A Power of Attorney allows an entity to act on behalf of another. Under the Sebi proposals, the PoA would identify accounts from which the broker or depository could transfer securities and funds for meeting margin or delivery obligations.
To stop its misuse, the paper has proposed that a PoA for stock brokers and depository participants should be in the name of the concerned entity and not in the name of any of its employees or representatives. Also, the original or certified copy of the document is to be provided to the clients after execution.
"The move is an investor-friendly one and we welcome it," E M C Palaniappan, president of the Association of National Exchange Members of India, a representative organisation for brokerages, said.
The paper said that the PoA should also provide for a means of settlement of disputes, with broking disputes being settled under the bye laws of the concerned stock exchange where the trades have been executed. In case of depositories, bye laws of the one where the demat account is held would be followed, it said.
In the case of mergers and demergers of stock brokers or depositary participants, a written confirmation would have to be obtained from the client to continue using the PoA if it does not provide sufficient authority to continue its use.
The document, which is to be executed and stamped as per the laws of the place where it is executed or kept as record, would also authorise the entity to send alerts about transactions by SMS to clients, according to the discussion paper.
The regulator has invited comments from the public up to November 30, 2009.




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