On 21st February 2019, Ministry of Corporate Affairs (MCA), has issued a notification by insert...
The SEBI has issued a clarification on the execution instructions of “DEMAT Debit and Pledge Instructions”, or DDPI vide dated 6th October 2022. The current instructions provide modifications and certain amendments.The SEBI circular dated 23rd April 2022 on the execution of Power of Attorney by the Stock Exchanges and Depositories. SEBI has further issued the clarification on this matter via circulars dated 31st August 2010 and 27th August 2010, which inter alia provides that the Power of Attorney (PoA) is optional and shall not be insisted upon by the Stock Broker or depository participant. Further, the earlier dated circular provides that the utilisation of the POA, if executed, shall be utilised for the purpose of:
Consequently, the SEBI, through a circular dated 4th April 2022, provides that in order to facilitate the above transactions,a separate document, i.e. DEMAT Debit and Pledge Instruction, shall be executed in favour of the Stockbrokers or Depositories Participant, and it will act evidence for clear transfer of authority.Therefore,to improve transparency and inclusion of other securities, a separate document is introduced, which shall serve the same purpose as PoA and mitigate the misuse of PoA. Further, the said circular shall be effective from 18th November 2022. The current clarification is issued to include other transactions in the process of facilitation which are enumerated below:
The SEBI has widened the scope of execution of the DEMAT Debit and Pledge Instruction in consolation with the Broker Associations and Depositors Participant. Further, it is being decided that the DDPI will include the following:
The current clarifications have amended and modified various provisions of the earlier instructions on executing DEMAT Debit and Pledge instructions. The SEBI has made amendments in consultation with the Broker Associations and Depositories to facilitate transparency among the transactions. The amendments and modifications are:
To provide transparency, the following conditions shall be complied with in the form of a separate document.
Further, it is provided that the obligation and deliveries shall arise out of the trades that the client executes on the Stock Exchange through the same stockbroker.
The modification provided in Para 8 under the current clarification can be simplified as follows:
The clients who have issued DEMAT Debit and Pledge Instruction with the stock broker or depository participant have to comply with the following provisions of the SEBI circular:
|Paragraphs 4.2.1 and Paragraph 4.2.2||SEBI/HO/MIRSD/DOP/CIR/P/2020/158 dated 27th August 2020||1st September 2022|
|Paragraph 1 (i) and 1 (iii)||CIR/MRD/DMS/13/2010 dated 23rd April 2010||1st September 2022|
|Paragraph 1 (iii) to the extent of Mutual; Fund Transactions and Tendering of Shares through Open offers||CIR/MRD/DMS/13/2010||18th November 2022|
The stock exchanges and depositories shall:
Further, they shall put the details on their website
To mitigate the risk of misuse of PoA executed by the client for specific transactions, SEBI has issued a circular to execute DEMAT Debit and Pledge Instruction. The clarification issued by the SEBI in pursuance of the circular dated 4th April 21022 will now include mutual funds transactions and tendering of shares through an open offer. Moreover, the stockbroker and depositories are asked to intimate the clients about the provisions of the circular so that the execution can be made accordingly.
Read our Article: Sample Format of Power of Attorney