Power of Attorney in Stock Market
What is Power of Attorney (POA)?
Power of Attorney (PoA) is a legal document that gives rights over an asset to a third party. The third party here is your stock broker which means your stock broker can operates your demat account on your behalf as per the terms in POA document signed by you. PoA is part of the demat account form and it can be signed digitally as well as on paper.
Purpose of Power of Attorney (POA)
PoA is not required for buy orders, it is required only for sell orders. While selling the shares, those shares are withdrawn from your demat account and delivered to the buyer. It is done by your stock broker. If you have given PoA to your stock broker, they will seamlessly transfer those shares on your behalf. If you don’t sign PoA, your stock broker will not be able to automatically transfer shares and other securities into and out of your account.
Is Power of Attorney (POA) mandatory for every Demat account?
No, Power of Attorney (PoA) is not mandatory for everyone. POA is required only for the delivery-based trading. You can avoid signing POA document if you are not engaged in delivery-based trading.
If case you don’t sign PoA, you have to manually transfer those shares while selling to the stock broker’s demat account by the next working day so that they can deliver those shares to the buyer. Failing to do so may result in penalty charges to you.
Conclusion
Signing a Power of Attorney (PoA) is completely up to you. You can choose as per your requirement and convenience whether to submit PoA or not.
If you don’t have a demat account, you can open your account in any of these stock brokers:
1. Alice Blue
2. Angel One
3. Zerodha
4. StoxKart
5. ICICI direct
Also read: What is Algo Trading
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