An Authorized Person is someone whom a stockbroker appoints. Such a person can act as the stock broker’s agent to grant access to the stock exchange’s trading platform. SEBI introduced it initially in the year 2009.
An important feature about the AP business model is that at one time he can be associated with no more than one broker, i.e multiple affiliations are not allowed in this model. Interesting, right?
Also Read: Sub Broker Vs Authorized Person
Authorized Person Registration Process:
It is essential for the stockbroker to get the registration of the Authorized Person done from its associated stock exchange. After this is completed, he can appoint an Authorized Person.
For a particular market segment such as the capital market, currency, or Future & Options, the registration of this AP business model can be done, though it depends on the person’s choice to select one or all of the segments
Authorized Person Eligibility conditions:
Here is a list of eligibility conditions which must be fulfilled to start an AP business model:
- An individual who has to be appointed as an AP needs to be at least 18 years old. The rule is applicable for all the members if it an LLP or partnership firm that is being appointed.
- A person residing in India can only become an AP. If it is a partnership firm, then it must be registered under the Indian Partnership Act, 1932; the LLP must be registered under Indian Limited Liability Partnership Act, 2008 and the Body Corporate should have been registered under the Indian Companies Act, 1956, to be eligible for the AP business model.
- It is essential for the AP to have cleared the 10th standard exam.
- The person should have a clean background, without any criminal records or any bad repute.
- An understanding of the stock market is an essential criterion to become an Authorized Person.
- There should be basic minimum infrastructure to start this business model. It includes office space, employee(s), desktop, internet connection, etc.
- If a person is an AP of one stockbroker, then he can’t become a sub-broker with some other stockbroker simultaneously.
Authorized Person Procedure:
Follow the few simple steps enumerated below to get started as an AP:
- First of all, choose the stockbroker with whom you want to start this AP business model. Going through the revenue sharing ratios offers by various stockbrokers along with their offers will help you create a comparative picture in your mind so that you can choose the best one that fits your business goals.
- On connecting with the stockbroker, a meeting will be set up with them to discuss all the details with the firm’s sales team.
- During this meeting, you can ask any doubt related to the business model. The roles that need to be carried out, along with the choice of your segment, revenue sharing, offers, commission, etc, will be all disclosed to you.
- Once you are fine with all the details, the relevant documents have to be submitted, which will be sent by the stockbroker for verification purpose.
- Once the document verification is completed, the stockbroker will draft a pre-formatted sub-broker agreement as prescribed by the concerned stock exchange.
- Then the process for getting you registered with the stock exchange will be started by the stockbroker in which he will submit the documents with the agreement copy after filling up the online form. The physical copies of the documents have to be submitted by the stockbroker within a period of 7 days of filling up the application online if it is BSE. But in the case of NSE, this is not needed, just the scanned copies have to be uploaded.
- All the submitted documents will be verified by the stock exchange and in case of any discrepancy, they will be sent back to the stockbroker so that he can get them rectified and resend them. This is the last step after which approval will be granted for the AP to start the business operations.
Furthermore, if you are existing sub-broker with a stockbroking firm, check out this review to learn how to convert from a sub-broker to an authorized person.
Authorized Person Registration Cost:
For becoming an AP, a registration fee of ₹2000+GST is needed for each segment in case of NSE, and BSE also has a similar fee range.
Apart from this, there are no charges and you must stay aware of any executive asking for any other sorts of related registration charges.
Authorized Person Registration Documents:
The following documents must be submitted to the stock exchange without fail in order to complete the process of registration:
- Copy of the PAN card
- An agreement between AP and stockbroker that has been signed and is as per the prescribed format has to be submitted.
- Proof of DOB.
- Proof of your address.
- Documents showing your academic qualifications.
Authorized Person business model Advantages:
Here is the list of benefits associated with AP partnership model:
- The revenue sharing in this business model is 60%-90% which is quite lucrative for a person to opt for this business model.
- You can start the business with a low initial investment of only Rs.10,000-Rs.300,000 which is considered to be much affordable compared to the sub-broker model.
- A small charge of just Rs. 2000 needs to be paid to the exchange in order to access various products so that clients can trade-in Commodity, Currency, Equity, Future & Options. Besides this, the broking house provides support regarding the Trading platforms such as the trading mobile app or the desktop terminal for free of cost.
- The AP does not need to set his own team for research and providing advice, as these are handled by the stockbroking house, which significantly decreases the investment.
- After the AP sets up the office on his own or by renting it, he will get support from the broking house for marketing online as well as offline, in the form of flex, banners and other forms of advertising.
- APs will also get training from the stockbroking house at monthly or quarterly intervals to ensure that they remain updated with the latest tools and techniques for efficient trading.
If you are looking to become an AP or a partner in a stockbroking business, let us assist you in taking the next steps forward.
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Authorized Person business model FAQs:
Here are the answers to some frequently asked questions related to the AP business model which can arise in your mind when you opt for this business model:
Is it possible for a sub-broker to get converted into Authorized Person on Capital Market by continuing the business operations?
A sub-broker on the Capital market can apply for cancellation of his sub brokership. After this only he can apply for the AP business model. The continuity of business operations won’t break, as the stock exchange will cancel his sub brokership and appoint him as an AP. Thus the KYC need not be filled again.
Is the number of offices an AP can open is restricted to one?
No, the AP can open more than one offices.
Suppose an AP intends to opt for more than one segment at the same time, is it needed to submit separate applications for each?
No, with one application, a person can opt for more than one segments while being appointed as an Authorized Person. Also, the agreement need not be more than one unless the stock exchanges are different.
When a person is operating from the stock broker’s office and has applied for AP, can he mention the stockbroker’s office as the office address?
Yes, in the application form, while applying form AP business model, such a person can use the stock broker’s office address.
Is it possible to alter an Authorized Person’s affiliation from one sub-broker to another?
Yes, this is possible but it requires the obtaining a ‘No objection Certificate’ from the current stockbroker. Along with this NOC, the new affiliating member needs to send an application for appointment as an Authorized Person to the new stockbroker.
If you wish to learn more about the business intricacies of stockbroking partnerships and models, here are a few references for you: