Understanding the Necessity of Power of Attorney (POA) for Brokers

by Anjali Sharma
22 April 20242 min read
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Understanding the Necessity of Power of Attorney (POA) for BrokersUnderstanding the Necessity of Power of Attorney (POA) for Brokers
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Overview

Do we wonder why we had to sign a POA while trading or opening a Demat account?

Power of Attorney, a term which sounds very serious to all of us and which makes a clear image of that we are going to commence something legal.

It raises many queries in one’s mind while the requirement of it to be used in some documentation. Now, we must know the diction of a POA.

The Power of Attorney (POA) is a legal document lending legal authority to another person to operate your account (in this case the Demat account) as per the pedagogy enclosed.

With the inception of online broking, the traditional method was no longer feasible. The POA was introduced for the smooth operation of the Demat account.

With the power of the POA, every time you sell shares the broker uses it to debit the shares from your Demat account and provide it to the exchange.

POA is also used to debit shares from your Demat account when you plan to pledge them to get collateral margin for trading futures and options.

The POA is not a compulsion every time but you need to have it while opening the Demat account for trading.

While trading futures and options or intraday equity trading, there is no requirement of the POA.

Does a POA is required to sell or buy shares?

  • When you buy shares, be it in an online or offline account, the shares are automatically transferred to your Demat account, you don’t need a POA to do this.
  • When you sell shares or want to pledge them, that is when the shares are going out of your Demat account, this is when the POA is required if it has to be done online.
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