In a fallout of the Karvy Stock Broking's malpractices, market regulator Securities and Exchange Board of India (Sebi) may soon block brokers from using the power of attorney (PoA) privilege, reported Economic Times. PoA gives the brokers the control of clients' demat accounts, giving an opening for misuse as it was done in Karvy's case.
“Power of attorney will be allowed only for settlement purpose, not for collateral. It will be easy to monitor as clients will be able to see where their shares are lying,” a person was cited as saying in the report.
However, in case of a default by the client, brokers will be able to invoke the pledge without the consent of the client. The market watchdog is likely to implement the proposal soon, the Economic Times report added.
Earlier, Karvy illegally pledged client's shares with banks and non-banking finance companies (NBFCs) to raise money which was then diverted to its other businesses such as real estate.
In December, Sebi rejected Karvy's plea to use its clients' power of attorney to settle trades done by them and said securities worth Rs 2,300 crore of more than 95,000 clients were illegally transferred by the broker.
First Published: Jan 20, 2020 9:33 AM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Lok Sabha Election 2024 — how regional parties are challenging national giants in Phase-4
May 15, 2024 6:17 AM
Supreme Court refuses plea seeking 6-year poll ban on PM
May 14, 2024 7:14 PM
Punjab Lok Sabha elections 2024: A look at BJP candidates
May 14, 2024 7:06 PM
Lok Sabha polls: EC disposes of 90% complaints related to MCC violations
May 14, 2024 4:45 PM