Definition of Authorised Persons and Sub Brokers in the Stock Market
An authorised person or a sub broker are individuals or registered company who have a network of investors and work with a stock broking organisation. The stock broker appoints an authorised person or a sub broker only if they fulfil certain criteria and provide a franchise to work on behalf of the broker. The mechanism works on a profit-sharing model where the broker retains a nominal percentage and the franchisee gets the maximum share. Here the broker is benefitted in terms of increased market coverage and business volume as the sub brokers bring in new investors under the franchise.
How Authorised Persons and Sub Brokers Are Different?
Many times authorised persons and sub brokers are considered as same but there are some minor differences. Authorised persons are individuals with a prominent background in the stock market with a robust network of investors. On the other hand, sub brokers are registered business entities registered under SEBI with excellent entrepreneurship skills and business acumen.
Below given are the other differences between the two:
- An authorised person does not need to be registered by SEBI but needs to sign an agreement with the broker. Contrarily, it is mandatory for a sub broker to be registered by SEBI.
- Both an authorised person and a sub broker need to make an initial deposit to the stock broker to fulfil the eligibility criteria. However, the amount for an authorised person is lower than that of a sub broker. The initial deposit amount for an authorised person starts from INR 10,000, sometimes it is exempted completely. The initial deposit amount for a sub broker may vary between INR 50,000 and INR 3,00,000.
- In terms of responsibility, both the parties perform similar kind of duties for the stockbroker but as the authorised person doesn’t have an infrastructure, the responsibilities are somewhat less as compared to a sub broker.
- Both the authorised person and the sub broker get support in terms of marketing, training, and other areas from the franchiser
Advantages of Sub Broking
If you have of plenty experience in stock market trading and advisory, you can channel your expertise by opting for a franchise under a stock broking firm. The franchisee will arrange for training and will give you all the necessary support to excel in this field. With a nominal investment, you can be part of their reputed franchise chain and loop in your existing client network ensuring a seamless investing experience. The commission offered is also lucrative whereas you don’t need to incur huge capital expenditure for infrastructure, technology, or manpower. The stock trading firm will offer all kinds of support banking on your behalf to meet your targets in generating revenue. You need to have a robust network of retail investors and the ability to retain existing customers and also high credibility to mature high-value transactions. The franchiser offers all kinds of training, trading platforms, and options to trade in multiple trading instruments.