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Karvy case fallout: Brokers may lose power of attorney privilege

Brokers taking collateral may only get to create a pledge on shares with customer consent.

By Reena Zachariah, ET Bureau |Updated: January 20, 2020, 07.01AM IST
MUMBAI: The Securities and Exchange Board of India (Sebi) may soon bar brokers from using power of attorney (PoA) privileges that give them control of clients’ demat accounts to prevent misuse as in the case of Karvy Stock Broking. The regulator plans to mandate that brokers taking collateral from clients can only create a pledge on the shares with customer
even if they are in the wrong, especially in the event of payment defaults. Sebi will take these issues into account while framing the new rules, said one of the two cited above. “In case of a default by the client, brokers will be able to invoke the pledge without the consent of the client,” said the person.

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