SEBI Extends Deadline For Power Of Attorney Norms
Revised norms, which were introduced in aftermath of the Karvy crisis, were to be originally implemented from June 1
The Securities and Exchange Board of India has deferred the implementation of revised power of attorney norms for dematerialised securities to Aug 1. Introduced in the aftermath of the Karvy crisis, the revised provisions were supposed to come into effect from June.
SEBI had issued a circular earlier this year to mitigate the risks of misappropriation of clients’ securities by a trading/clearing member or depository participant. The intent of the regulator was to prevent trading and clearing members from using clients’ securities to meet their own obligations.
As per the February circular, trading and clearing members were directed to accept collateral from clients in the form of securities only by way of a margin pledge. It prohibited such members from following any other procedure for pledge creation. Further, the circular prohibited transfer of shares to the demat account of trading / clearing member for margin purposes.
The circular also stipulated that holding a power of attorney will not be considered as equivalent to the collection of margin in respect of securities held in the demat account of the client.
And lastly, members were directed to initiate a margin pledge in the client’s accounts only after a receipt of a request from client. The pledge creation request will remain pending till receipt of a confirmation from the client.
Citing that the stock brokers had expressed difficulty in implementing the revised provisions due to the outbreak of Covid-19 pandemic and the resultant lockdown, SEBI has allowed extension of implementation date of the revised framework to August.