What Is Power of Attorney (PoA)? Types, Uses & How It Works

All About Power of Attorney

The Power of Attorney or POA in short is the legal consent form that is signed by an investor to authorize his or her broker to carry out debit transactions from the Demat account of the investor. The POA is a one-time affair, meaning you only need to sign it one time, and it will remain valid for all sell transactions throughout the time your account is open with the particular broker. 
The POA is not online or digitized at present, even though you can now open a Demat account online.  At present, POA is not mandatory to open a demat account with a Financial Broker. However, if you do not have POA then you need TPIN authorization with (Central Depository Services Ltd) CDSL to authorize the selling of shares on a given trading day. 

History of Power of Attorney

• In the past, there used to be a Delivery Instruction Slip, DIS that the investor had to manually fill up and post to the broker each time they sell trade had to be executed via the broker. Because it was a very tedious process and time-consuming too, SEBI came up with the Power of Attorney form which was a one-time consent form for all debit transactions on behalf of the client.

• After this, to introduce more transparency and security in the selling of stocks, SEBI again came up with an electronic version of DIS or e-DIS, where you could authorize the broker to debit from your demat account when you wanted to sell shares for each trading day using a TPIN (Transaction Personal Identification Number). Coupled with OTP that is sent only to the registered mobile of the client, it proved to be much more secure, swift, and easy to use.

• However, the Power of Attorney form or POA form continues to be valid even after TPIN-based e-DIS was introduced.

• Please note: If you have not done TPIN Authorization and have not submitted a POA form authorizing your broker for debit transactions, you will not be able to do a sell trade via the broker’s trading platform.

What is the Power of Attorney form?

The Power of Attorney form is a physical form that the client (investor) of a financial broker needs to sign with details like Name, Client ID, along with Signatures of First or Sole Holder, Second Holder, Third Holder on each page and broker details and send it by post or courier to the Broker’s head office. Usually, every broker will have a standard template or format with details already present in acceptable legal language and common information like broker details already filled up. The POA form has to be printed only on a stamp paper or any A4 sheet with Franking (affixed a stamp by a notary or registered officer and stamp duty paid)

How does Power of Attorney Work?

• Once the client has sent the filled-in physical POA form via post or courier to the Broker’s head office, it could take up to 2-3 days for the POA form to reach the Broker. Then, the broker processes the POA form and updates the info with CDSL which could take a day or two.

• Only after the POA for the demat account has been accepted, the client of a broker can avail of the power of attorney to sell shares instead of TPIN authorization.

• Make sure the signatures on the POA form match the signatures in KYC records with the Broker. If there is any mismatch, then the Broker will not accept the POA form.

  Frequently Asked Questions (FAQ)

  1. What is Power of Attorney (PoA)?

  Power of Attorney is a legal authorisation that allows one person to appoint another person to act on their behalf for specified matters.

  2. What are the different types of Power of Attorney?

  Common types include General Power of Attorney and Special or Specific Power of Attorney. The available types can vary depending on the purpose and applicable law.

  3. How does Power of Attorney work?

  The Principal grants specific authority to an Agent through a legal document. The Agent can then perform the authorised activities within the scope of the PoA.

  4. Can Power of Attorney be used for financial transactions?

  Yes. A PoA may authorise an Agent to perform certain financial activities, subject to the terms of the document and the applicable rules of the relevant institution.

  5. Can Power of Attorney be revoked?

  Depending on the circumstances and applicable law, the Principal may generally revoke a PoA by following the required legal procedure.

  6. What should I check before signing a Power of Attorney?

  Review the scope of authority, validity period, permitted activities, revocation process and responsibilities of the Agent before signing.

  7. Is Power of Attorney the same as ownership?

  No. Granting Power of Attorney generally gives another person authority to act on your behalf; it does not automatically transfer ownership of your assets or property.