What is Power of attorney (POA) and is it mandatory
What is Power of Attorney?
Today we will learn about the Power of Attorney , popularly known as POA . Power of attorney is required when you want to sell share from your demat account and the shares will go out of your demat account. You have to sign a Power of Attorney form when you open a demat account with an online broker like Zerodha or Upstox
POA was introduced for smooth operation of the demat account. With the help of POA, whenever you sell shares the broker uses it to debit the shares from your demat account and provide it to the exchange. By rule , to remove any stock from your demat account, your broker needs written permission from you . But this is not possible everyday as you will be buying and selling shares frequently . Here comes the concept of POA. POA is also used to debit shares when you intend to pledge them to get collateral margin for trading futures and options.
What is POA?
POA is a legal authority provided to another person through a legal document to operate your demat account as per the instructions contained. Power of attorney is not compulsory, but it is required for smooth operation of your demat account.
Different types of POA ?
There are two types of POA,
- Specific/Limited and
- General POA.
Specific POA is the limited range of powers of the POA where as General POA is generic. The POA given to Zerodha is specific and mentions the various powers on the POA. When signing the POA, you have to ensure that it is in the name of a SEBI registered stock broker.
Uses of POA?
There is no requirement of the POA if you trade in futures and options or intraday equity. Whenever you sell shares from your demat account or want to pledge them for getting margin for trading F&O, the POA is used to debit the shares from your demat account. This ensures that the entire process is online and less inconvenient.