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Will replace Power of Attorney; new framework to take effect from July 1
SEBI has introduced a new document to replace Power of Attorney (PoA) for the purpose of pledging and repledging of stocks for margin purpose. It is called Demat Debit and Pledge Instruction (DDPI), which will come into effect from July 1.
For pay-in obligations
Clients can use DDPI to authorise the stock broker and depository participant to access their beneficiary ownership account (BOA) only to meet pay-in obligations for settlement of trades executed by them. The use of DDPI will be limited only for two purposes: for the transfer of securities held in the beneficial owner account of the client towards stock exchange related deliveries or settlement obligations arising out of trades executed by such a client. Second will be pledging/re-pledging of securities in favour of the brokerto meet margin calls.
“The DDPI shall serve the same purpose of PoA and significantly mitigate the misuse of PoA,”SEBI said, adding that the client can use the DDPI or opt to complete the settlement by issuing physical Delivery Instruction Slip (DIS) or electronic Delivery Instruction Slip (eDIS) themselves.
SEBI said the existing PoAs will continue to remain valid till the time the client revokes the same. Thus, the stock broker and depository participant will not directly or indirectly compel the clients to execute the DDPI or deny services to the client if the client refuses to execute the DDPI, it added.
Explicit consent needed
The DDPI needs to be executed only if the client provides his/her explicit consent for the same, including for internet-based trading. It should be adequately stamped and can be digitally signed by the clients.
According to the circular, the PoA will be optional and should not be insisted upon by the stock broker and depository participant for opening of the client account. A clause in this regard will be incorporated under the sub-heading ‘Additional Rights And Obligations’ of the Rights and Obligations Document.
SEBI said the depositories should ensure matching and confirming the transfer of securities with client-wise net delivery obligation arising from the trade executed on the exchange, as provided by the Clearing Corporation to depositories for each settlement date.
This will be for the execution of the DDPI for fulfilling delivery/settlement obligations, prior to executing actual transfer of securities based on details provided by stock broker and depository participant.
The securities transferred on the basis of the DDPI provided by the client will be credited only to the client’s trading member pool account. The DDPI will be registered in the client demat account.