An Authorised Person (AP or a sub-broker are professionals who act as an intermediary between the main broker and the client. They assist clients in various activities such as financial transactions and paperwork. In return for the services rendered by the sub brokers to the brokers, they receive a certain commission from the transaction done by the investors. Sub-brokers are authorised by the main broker to act on their behalf. They provide client services such as investment advice, portfolio management, and research reports. However, being registered as a sub-broker does not authorise them to engage in any of these activities. They must obtain the relevant registration from the regulatory authority, specifically, SEBI, in order to provide these services.
Sub-brokers also help clients with regulatory compliance and documentation.
What is sub broker?
A sub-broker is an individual or entity that acts as an intermediary between a stockbroker and investors. They assist in client acquisition, facilitating stock market trades, and providing investment advice. Sub-brokers are not direct members of the stock exchange but work under a registered stockbroker. They play a crucial role in expanding the broker’s reach and offer personalised services to clients. To operate legally, sub-brokers need to be registered with SEBI (Securities and Exchange Board of India).
Understanding sub-brokers
Sub-brokers play a crucial role in the securities market, acting as intermediaries authorised by main brokers to facilitate transactions on their behalf. Here's a breakdown of their responsibilities and functions:
1. Authorisation
Sub-brokers are authorised by the main broker to act on their behalf. They are required to follow the rules and regulations set by the main broker and the regulatory authorities.
2. Client services
Given that they have relevant registration from SEBI, sub-brokers may provide various client services such as investment advice, portfolio management, and research reports. They also assist clients with regulatory compliance and documentation.
3. Commissions and fees
Sub-brokers receive a commission from the transactions done by the clients in return for the services rendered by them to the brokers.
4. Regulatory compliance
Sub-brokers are required to comply with the rules and regulations set by the regulatory authorities. They must ensure that their clients are aware of the risks involved in investing in securities.
5. Market reach
Sub-brokers help in expanding the market reach of the main broker by bringing in new clients. They also help in retaining existing clients by providing them with quality services.
Sub-brokers play an important role in the stock market industry by providing physical assistance to investors who prefer having an expert to assist them in transactions.
Difference between sub-broker and stockbroker
Sub-brokers and stockbrokers are both key players in the securities market, but they have distinct roles and responsibilities:
Aspect |
Broker |
Sub-broker |
Definition |
Authorised member of a stock exchange |
Gets registered through a broker |
Role |
Executes trade on behalf of clients |
Acts as an intermediary between broker and client |
Authorisation |
Registered with SEBI (Securities Exchange Board of India) and Exchanges |
Appointed through registration in an exchange via one of its members |
Services provided |
Purchase and sell stocks and securities on behalf of clients |
Assist in client acquisition and order execution |
Fee structure |
Charge brokerage fees (based on trades or flat rate) |
Earn commissions from client transactions |
Regulatory compliance |
Registered and authorised to transact in asset markets |
Required to comply with SEBI regulations |
Relationship with main broker |
Independent, not under the guidance of another entity |
Works under the supervision of the main broker |
Benefits of being a sub-broker
Being a sub-broker offers several advantages that facilitate career growth and client service:
- Established infrastructure: Affiliation with an authorised stockbroker provides access to an established infrastructure and support system. This eliminates the need for investing in costly infrastructure setup, saving time and resources.
- Access to tools and resources: Sub-brokers benefit from access to research tools, market reports, and financial analysis provided by the stockbroker. This enables informed investment decisions and enhances client service capabilities.
- Enhanced credibility: Partnering with a reputed stockbroker enhances market credibility and reputation. This fosters customer trust and opens up potential business opportunities.
- Financial knowledge: Sub-brokers gain practical financial knowledge, exposure to market trends, and collaboration opportunities with stockbrokers. This hands-on experience is invaluable for career advancement in the financial industry.
- Additional client services: Sub-brokers can offer personalised investment advice, quick transaction execution, portfolio management, and responsive client support. These added services contribute to client satisfaction and retention.
- Low initial investment: Starting as a sub-broker requires a relatively low initial investment compared to establishing an independent brokerage firm. This affordability lowers entry barriers, making the financial sector accessible to aspiring professionals.
Overall, being a sub-broker combines operational support, access to resources, and career development opportunities, making it a beneficial path for individuals entering or advancing in the financial services industry.
How to become a sub-broker
Embarking on a career as a sub-broker is an exciting journey into the world of finance, but it requires careful preparation and adherence to certain processes. Below, we outline the crucial steps to becoming a sub broker, with reference to regulatory requirements and industry best practices.
1. Research and education
The foundation of a successful sub-broker begins with research and education. It is imperative to gain a solid understanding of the financial industry and its intricacies. Whether through formal education or self-study, acquiring knowledge about stock markets, investment instruments, and regulatory compliance is crucial.
2. Locate a reputable registered stockbroker
The next step involves establishing a partnership with a reputable registered stockbroker. This main broker will be your guiding force throughout your journey as a sub-broker. Choose a main broker with a strong reputation, as their support and guidance will be invaluable.
3. Contact the stockbroker
Initiate contact with the selected stockbroker. This is the point at which your journey as a sub-broker takes shape. Your main broker will guide you through the application and onboarding process, ensuring you are well prepared for your new role.
4. Compliance and documentation
Compliance with regulatory requirements is non-negotiable. Sub brokers are obligated to adhere to the rules and regulations set by regulatory authorities. Additionally, it is your responsibility to ensure that your clients are aware of the risks associated with investing in securities. Compliance and proper documentation will protect both you and your clients.
5. Application and agreement
Following the completion of compliance and documentation procedures, sub-brokers must complete an application form and sign an agreement with the main broker. This formalises your association and clarifies the terms of your partnership.
6. Licensing and registration
To operate as a sub-broker, you must obtain the necessary licences from regulatory authorities. Licensing demonstrates your competence and adherence to industry standards. Additionally, registration with the stock exchange is required for you to carry out your activities within the market.
7. Training and onboarding
Successful sub-brokers undergo training and onboarding processes provided by the main broker. This is an essential step that equips you with the knowledge and tools to offer quality services to your clients. You will learn about the policies, procedures, and systems of the main broker, which are vital for smooth operations.
8. Build and expand clientele
Once you have successfully navigated the earlier steps, it is time to put your knowledge and expertise to work. Your focus should be on building and expanding your clientele. This involves providing excellent services to your clients, offering investment advice, and ensuring their financial goals are met. The growth of your clientele will be a testament to your success as a sub broker.
Conclusion
Sub-brokers play an important role in the stock market industry by providing physical assistance to investors who prefer having an expert to assist them in transactions. Becoming a sub-broker requires research, education, compliance with regulatory requirements, licensing, training, and building clientele.
Sub brokers can start their journey by researching and educating themselves about the industry. They should locate a reputable registered stockbroker and contact them to initiate the process. The next step is compliance and documentation, followed by application and agreement.
