Stock market investments are an excellent way to aid your financial growth. You can invest in multiple options, debt equity, hybrid funds, and more. Moreover, thanks to the fintech advancements, you can invest without physically visiting the broker or stock exchange. 

 

With digital trading, you can buy or sell your shares through a broker of your choice. However, a broker cannot act on your shares freely until they have the power of attorney. 

 

Sharing PoA in a Demat account promotes the freedom of trading for the broker, as they do not have to ask permission for every small trading action. However, enabling this facility poses an equal risk for investors. 

 

Read on to learn about the Power of Attorney in a Demat account, its types, why it is required, and more.

What is the Power of Attorney in a Demat Account?

PoA in a Demat account is a document that gives the broker the right to make transactions on behalf of the Demat account holder. Once signed, brokers can sell or buy shares as they deem necessary and profitable, depending on market opportunities, without verifying each transaction. 

 

When executing the power of attorney, you can limit the freedom the broker has over your account. You can give the full permission to execute any transaction or decide which shares the broker may trade on your behalf.

What are the Different Types of Power of Attorney?

The PoA in a Demat account is of two types: Specific PoA and General PoA. Read on to know more about them. 

  • Specific PoA: Gives limited rights to the broker and may have a specific date of validity
  • General PoA: Gives more power than a specific PoA and hence is not preferable 

Why is a PoA Required for Demat Accounts?

The Power of Attorney in a Demat account gives brokers more freedom to act on the account holder’s behalf when executing online trading. While brokers can buy and store securities and shares in the investor's Demat account, they cannot sell the shares. 

 

To debit any shares from the Demat account, they must get a Delivery Instruction Slip signed by the account holder. For active online trading, this becomes a hassle as it may be needed multiple times. 


By giving the PoA of a Demat account to brokers, you are permitting them to make decisions regarding your shares.

Is a Power of Attorney Mandatory for Trading?

No, as per Securities and Exchange Board of India (SEBI) regulations, brokers cannot force you to give your PoA. Neither can they deny you their services if you do not execute a power of attorney in a Demat account. 


Furthermore, no one else can execute or revoke the PoA for the Demat account on your behalf. This means that brokers must verify the identity of the person making any such requests before taking action.

Precautions Before Signing your Demat Account Power of Attorney

Here are some general precautions you should take before signing your PoA for a Demat account:

  • A power of attorney for a Demat account should clearly state the client’s Demat accounts and bank accounts over which the broker may operate

  • Always draft the Power of Attorney over the SEBI-registered depository participants’ name and not any employee

  • The PoA of a Demat account must contain the clause to revoke or cancel the right to the broker anytime, as per the client's request 

  • In the case of a joint Demat account, the concerned account holder must execute a power of attorney for the Demat account

  • Stockbrokers must give details of the transaction to the client regularly

  • The broker must not trade or transfer the securities off the market without the client's approval

Lastly, remember to revoke the PoA of a Demat account when not required for security purposes. 

 

Considering these points will help you protect your shares if you have given your broker the PoA of your Demat account. Remember, in case you change your mind, you can also revoke or cancel the broker's power of attorney in a Demat account anytime. In addition, you can now choose to execute the ‘Demat Debit and Pledge Instruction’ instead of a PoA. 


However, if you don't have a demat account or a trading account, you can open a new one on Bajaj Markets. Here, you can open an account online in just a few minutes. Moreover, there are no account opening charges or annual maintenance charges, so you can carry out your trading activities affordably.

FAQs on Power of Attorney in a Demat Account

Is it wise to give your PoA to the broker?

Giving the PoA in a Demat account is a subjective decision, depending on your financial goals and relationship with the fund manager. If you want to avoid the hassle of signing delivery instruction slips for every trade, then you can give Power of Attorney to your broker. Make sure to draft it as per SEBI’s guidelines. 

Can I open a Demat account or trading account without a PoA?

Yes, handing over the power of attorney is not mandatory for opening a Demat account or trading account.

Can I cancel or revoke my power of attorney from my Demat account?

Yes, you have the authority to revoke a power of attorney in a Demat account or cancel it at any time. 

How can I sell my shares without a PoA?

If you have not given the PoA for a Demat account to the broker, then you must sign the Delivery Instruction Slip (DIS) to allow the sale of shares. You can also execute the Demat Debit and Pledge Instruction (DDPI).

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