BUSINESS

SEBI Clarifies Guidelines Regarding Instruction Slip for Shares Pledging

To curb clients' abuse of the stockbroker's PoA, Sebi expanded the scope of DDPI for pledges and repeals of securities for margin purposes.

To curb clients’ abuse of the stockbroker’s Power of Attorney (PoA), Sebi on Thursday expanded the scope of the Demat Debit and Pledge Instruction (DDPI) for pledges and repeals of securities for margin purposes.


Sebi said in a circular that mutual fund transactions executed on stock exchange order entry platforms and tenders for the public offering of shares through stock exchange platforms would also be covered under DDPI.


DDPI serves the same purpose as PoA and significantly reduces the abuse of PoA. The guidance, which will go into effect on November 18, was also issued in the context of PoA abuse incidents.


“In light of the representation and consultation of the Brokers Association and the depository, it has been decided to expand the scope of the DDPI to include mutual fund transactions executed on stock exchange order entry platforms and tenders for shares publicly offered through stock exchange platforms,” Plug than said. In July, Sebi extended the deadline to enforce guidelines related to stock pledges and repledges by two months to September 1.

With the implementation of the guidelines, the Demat Debit and Staking Instruction (DDPI) replaced the PoA document.


Through DDPI, clients expressly agree to authorize stockbrokers and depository participants to access their beneficial owners’ accounts to meet their payment obligations to execute trade settlements. The use of DDPI is limited to two purposes. One is for the transfer of securities held in the account of the beneficial owner of a client to a stock exchange-related delivery or settlement obligation arising from a transaction executed by that client.


The second purpose is to pledge or repledge securities to trading members or clearing members to meet client margin requirements. Clients can use DDPI or choose to self-issue physical delivery orders (DIS) or electronic delivery orders (EDIS) to complete the settlement.


However, the existing PoA will remain in effect until the client revokes it. Therefore, brokerages and depository participants will not directly or indirectly enforce DDPI on clients, nor will they refuse to serve clients if clients refuse to enforce DDPI. It should be fully stamped and digitally signed by the client.

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