📚 PASS Investment Adviser (Level 1) Difficulty: Beginner ℹ️ Info   ~5 min read
📌 Chapter 17.4 — Power of Attorney

Imagine you are an investment advisor managing a high-net-worth portfolio for a client who frequently travels for business in Southeast Asia. The client has granted a Power of Attorney (PoA) to their spouse to ensure that trade executions, such as rebalancing equity positions or liquidating debt instruments, can occur without delay during the client’s absence. You receive a trade instruction from the spouse, while simultaneously receiving an email from the primary investor asking to cancel a previously placed order.

This scenario highlights the core reality of the PoA: it is a concurrent arrangement, not an exclusive transfer of rights.

In the Indian capital markets, the primary investor—or grantor—never relinquishes control by appointing an attorney. The PoA serves as a legal delegation of specific administrative powers, effectively creating a parallel path for account operations. As an advisor, you must maintain a clear log of all instructions, as both the principal and the agent possess the legal standing to initiate transactions. This shared authority requires a robust internal compliance process to ensure that conflicting instructions are reconciled before any execution occurs in the clearinghouse or depository systems.

Practically, this means that your communication protocols must remain inclusive. If your investment model dictates a specific tactical asset allocation shift, you must be prepared to interact with both parties. The risk here is not just operational, but fiduciary; if the agent and the principal offer contradictory commands, the advisor must pause the execution to seek formal clarification. This prevents unauthorized turnover or inadvertent violations of the client’s risk appetite, as defined in their Investment Policy Statement (IPS).

Consider a case where a portfolio is heavily weighted in volatility-sensitive stocks. The grantor may authorize an agent to handle liquidity needs, yet if the agent initiates a sell-off that triggers a taxable capital gains event the grantor wished to avoid, the friction between their roles becomes apparent. The PoA is a tool for continuity, not a license for the agent to deviate from the grantor’s strategic intent.

As professionals, we must view the PoA as a bridge for efficiency, while remaining anchored to the grantor’s ultimate legal and beneficial ownership of the assets.1

Nuance

⚠️ Nuance
Many candidates incorrectly assume that a PoA acts as a ’transfer of authority,’ where the agent replaces the owner for the duration of the agreement. In reality, the grantor retains full legal access to the account, meaning the advisor is often fielding inputs from two distinct sources. Failing to distinguish between ‘agent’ and ‘owner’ can lead to serious breaches of the duty of care, particularly when the agent acts in a way that contradicts the owner’s known long-term objectives.

Check Your Understanding

Practice Question 1

An investor grants a General Power of Attorney to their sibling to manage a Demat account. If the investor continues to place trades directly while the sibling simultaneously submits a redemption request, how should the investment advisor proceed?

Practice Question 2

Which of the following activities is strictly prohibited for a PoA holder, regardless of the breadth of authority granted in the document?

This is a companion read for Section 17.4 — Power of Attorney from PASS Investment Adviser (Level 1) by Akhilesh Gururani, available on Amazon Kindle.

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  1. Beneficial ownership refers to the right to receive benefits of ownership, such as dividends or capital appreciation, even if the legal title is held by another party or if the account is managed by an authorized agent. ↩︎