Demat Debit and Pledge Instruction (DDPI) — How It Replaced Broad PoA Authorisations

SEBI introduced the Demat Debit and Pledge Instruction (DDPI) as a separate document to replace the broad authorisations previously covered under Power of Attorney. While executing a PoA, authorisation is given by client to the stock broker / stock broker and depository participant to access the Beneficial Owner (BO) account of the client to meet settlement obligations. To make this process more transparent and simpler, SEBI introduced the DDPI. This article explains how DDPI works, what it authorises, and why it replaced broad PoA authorisations.

The Regulatory Basis

SEBI Circular SEBI/HO/MIRSD/DoP/P/CIR/2022/44 dated April 04, 2022 introduced the DDPI. The DDPI serves the same purpose of PoA and significantly mitigates the misuse of PoA. The use of DDPI shall be limited only for specific purposes.

What DDPI Authorises

The DDPI authorises the stock broker / stock broker and depository participant for:

1. Transfer of securities held in the beneficial owner accounts of the client towards Stock Exchange related deliveries / settlement obligations arising out of trades executed by clients on the Stock Exchange through the same stock broker.

2. Pledging / re-pledging of securities in favour of TM / CM for the purpose of meeting margin requirements of the clients.

3. Mutual Fund transactions being executed on stock exchange order entry platforms.

4. Tendering shares in open offers through Stock Exchange platforms.

How DDPI Works

Execution

The DDPI, which is indexed as part of the Voluntary Documents, shall be executed only if the client provides his/her explicit consent for the same, including internet based trading. The DDPI shall also be adequately stamped. The DDPI can be digitally signed by the clients.

Validation by Depositories

For the execution of the DDPI for fulfilling delivery / settlement obligations, prior to executing actual transfer of securities based on details provided by stock broker / stock broker and depository participant, the Depositories shall ensure matching and confirming the transfer of securities with client-wise net delivery obligation arising from the trade executed on the exchange, as provided by the Clearing Corporation to Depositories for each settlement date.

Credit of Securities

Securities transferred on the basis of the DDPI provided by the client shall be credited to client's TM pool account / CM pool account / demat account of clearing corporation, as the case may be.

Registration

The DDPI provided by the client shall be registered in the demat account of the client by TM / CM.

Revocation

Stock Exchanges and Depositories shall ensure that stock broker / stock broker and depository participant providing DDPI facility, has enabled its clients to revoke / cancel the DDPI provided by them.

Why DDPI Replaced Broad PoA Authorisations

1. Transparency

The DDPI makes the process more transparent by limiting authorisation to specific, well-defined purposes. The client knows exactly what they are authorising.

2. Simplicity

The DDPI is a simpler, more straightforward document than the broad PoA. It does not contain the extensive and often confusing clauses that PoAs typically contained.

3. Mitigation of Misuse

The DDPI significantly mitigates the misuse of PoA by limiting authorisation to specific purposes. The stock broker cannot use the DDPI for purposes beyond those specified.

4. Validation by Depositories

The DDPI requires validation by depositories before any transfer is executed. This adds an additional layer of protection for clients.

5. Client Control

The DDPI gives clients more control over their demat accounts. Clients can revoke the DDPI at any time and are not required to execute it if they do not wish to.

PoA vs DDPI — Key Differences

| Aspect | PoA | DDPI | | Purpose | Broad authorisation for demat and bank account operations | Limited authorisation for specific purposes | | Scope | Can cover multiple purposes including off-market transfers | Limited to settlement obligations, margin, MF transactions, and open offers | | Validation | No automatic validation by depositories | Validated against client-wise net delivery obligation | | Revocation | Revocable at any time | Revocable / cancellable at any time | | Optional | Optional; cannot be insisted upon | Optional; cannot be insisted upon |

Client Rights

• PoA is optional. PoA is optional and should not be insisted upon by the stock broker / stock broker depository participant for opening of the client account.

• DDPI is optional. The existing PoAs shall continue to remain valid till the time client revokes the same. Thus, the stock broker / stock broker and depository participant shall not directly / indirectly compel the clients to execute the DDPI or deny services to the client if the client refuses to execute the DDPI.

• Client may use DDPI or opt to complete the settlement by issuing physical Delivery Instruction Slip (DIS) or electronic Delivery Instruction Slip (eDIS) themselves.

How We Help

At Anuj Desai & Associates, we help stock brokers implement the DDPI framework, draft DDPI documents, and ensure compliance with SEBI's requirements. If you need assistance with DDPI compliance, reach out to our regulatory compliance desk.