The Securities and Exchange Board of India (SEBI) has introduced a new document namely ‘Demat Debit and Pledge Instruction (DDPI)’ which will come into effect from July 1, 2022. DDPI will replace Power of Attorney (PoA) for the purpose of pledging and repledging of stocks for margin purpose. It will be registered in the client demat account.
Need for DDPI:
To curb possible misuse of PoA given by clients to stock brokers
Use of DDPI:
Its use will be limited only for two purposes viz.
i.Firstly, for the transfer of securities held in the Beneficial Owner Account (BOA) of the client towards stock exchange related deliveries or settlement obligations arising out of trades executed by such a client.
ii.Secondly, for pledging/re-pledging of securities in favour of the broker to meet margin calls.
With the implementation of these new guidelines, PoA will no longer be executed for the two purposes.
Key Points:
i.Clients can use DDPI to authorize the stock broker and depository participant to access their BOA, as per the above mentioned purpose ‘i.’.
ii.DDPI can be used by clients through issuing physical Delivery Instruction Slip (DIS) or electronic Delivery Instruction Slip (eDIS) themselves.
iii.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.
PoAs validity:
The existing PoAs will continue to remain valid till the time the client revokes the same. Thus, there will be no compulsion on the client for the execution of DDPI. These instruction slips require clients’ explicit consent, including for internet-based trading.
What is PoA?
It is a document that gives another person the legal authority to act on your behalf as per the terms mentioned in the document. In the case of a demat account, the PoA gives the online broker the legal authority to make certain decisions on your account.
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SEBI bans NFOs by Mutual Fund industry by 3 months
SEBI bars the launch of new fund offer (NFO) or launching of fresh schemes by mutual funds (MFs) until the MF industry complies with SEBI’s new rules. The deadline for meeting the norms is extended by 3 months to July 1, 2022 from April 1, 2022.This is first of its kind ban on launch of new fund offer (NFO) by mutual funds.
- In this regard, there will be discontinuing the practice of pooling client money for mutual fund (MF) transactions on the stock exchanges and other online platforms, among others.
- SEBI also directed the MF industry to implement a two-factor authentication for redemption and verification of source accounts when MF investments are made.
The information for the same was provided by SEBI through a letter to the Association of Mutual Funds of India (AMFI).
Key Points:
i.NFO is a first time subscription offer for the new scheme.
ii.This ban is to protect the MF investors interest. It can delay 15-20 issues.
iii.In this regard, no distributor, online platform, stockbroker or investment advisor use pool accounts and then transfer it to the fund house for purchasing units of schemes for investors.
Recent Related News:
i.SEBI gave final approval to the BSE Limited (Formerly Bombay Stock Exchange) for trading in electronic gold receipts (EGR), a form of shares in demat accounts, that paves way for spot bullion exchange.
ii.SEBI restructured its 8-member advisory committee on Investor Protection and Education Fund (IPEF), under the Chairmanship of Gurumoorthy Mahalingam.
About Securities and Exchange Board of India (SEBI):
Establishment – 12th April 1992 (In accordance with SEBI Act 1992)
Headquarters – Mumbai, Maharashtra
Chairperson – Madhabi Puri Buch
