Who is an Authorised Person? – Meaning & Responsibilities

Authorised individuals, also known as sub-brokers, are crucial participants in the capital market and serve several significant responsibilities. Authorised people have certain important obligations and play a big part in the stock market. You should trade on the capital market through an authorised person, a knowledgeable individual who can help you navigate the equity market.

Individuals or institutions cannot make direct stock and share investments. Investors must use brokers or broking companies to achieve this. These brokers are authorised to trade on these stock exchanges as members of those exchanges. However, because there aren’t many brokers, authorised individuals do most of the labour involved in investing.

Authorised Person Meaning

An authorised person or a sub-broker meaning as defined by NSE, is a registered stock exchange member who is authorised to buy and sell securities on behalf of their clients. To become an authorised person, an individual must pass the NSE’s membership examination and be approved by the exchange. Trading Members and authorised individuals are required by law to execute a contract. The obligations and rights of both parties are outlined in this agreement.

However, authorised persons are not directly registered with the exchange. As a result, they are employed by stockbroking firms, which helps them develop a comprehensive business network. Authorised persons play a vital role in the stock market by providing liquidity and facilitating price discovery. They also provide a link between investors and listed companies. By acting as an intermediary, authorised persons can advise and guide their clients on the best way to invest their money.

Responsibilities of an Authorised Person

The role of an authorised person is subject to regulation by the Securities and Exchange Board of India (SEBI). SEBI has established several rules and regulations to protect investors from fraud and unfair practices. Authorised persons must comply with these rules and regulations to maintain their membership in the NSE.

Sub-brokers are expected to play a variety of responsibilities across many frontiers. It may be included under the functions of stock exchange sub-brokers, stockbrokers, and investors.

With a stockbroker

Authorised personnel carry out their duties for the stockbrokers’ employer and work under the stockbrokers’ brand. The following are some of the functions that authorised persons perform for stockbrokers:

Business growth

An authorised person’s fundamental duty is to support the maximisation of deals under his jurisdiction. By finding a lot of investors interested in buying securities and equities, he is in charge of expanding company volume.

Maintain transaction quality

The authorised persons are in charge, and it is up to them to guard the integrity of the financial market by prohibiting investors from presenting fraudulent papers to the stockbroker.

Assist a stockbroker in sales

They are obligated to send sales alerts to stockbrokers on the part of the trading company and to give stockbrokers information on all transactions made by their customers.

Keep negotiations transparent

The authorised person collaborates with the stockbroker to keep track of and index every documentation related to every transaction that goes through his desk. They operate in the client’s best interests regarding dividends, shares, bonus rights, and other assets. They must also assist the stockbroker in altering papers that have been identified as inappropriate.

With stock market

Since authorised persons are not officially stock exchange members, they are not directly subject to the stock exchange’s authority. But to support it, an authorised individual carries out specific tasks.

A stockbroker is the source of a franchise for an authorised individual. After getting the franchise, an authorised person’s responsibility is to give clients helpful stock market advice and help them make smarter investment choices. So, regarding the stock market, a sub-broker’s responsibility is to maximise trades in his region.

With Clients

Authorised persons are important in helping traders maximise their return on investment. The authorised person’s capacity to find profitable transactions for clients and persuade them to increase their investment is very important. In this approach, they accomplish dual goals of assisting the brokerage house’s company expansion and assisting clients in receiving a fantastic yield on their investment. 

Who can Become an Authorised Person?

A higher education degree or years of professional experience are not required to become a sub broker or an authorised person. But if you wish to succeed, you’ll need certain fundamental traits like enthusiasm for winning and devotion. The eligibility criteria to become an authorised person in India are as follows:

  • A person, a partnership, or a limited liability corporation can choose to appoint an authorised Person.
  • If it’s a partnership business, LLP, or an individual, the individual should be at least 18 years old.
  • The authorised person should have designated the matrix as meeting the 10th standard.
  • An authorised individual shouldn’t have a bad reputation or any past convictions.
  • It is recommended that the authorised person has a stock market understanding.
  • The required materials should be available to the authorised person, including workspace, personnel, tools, etc.

The ability to confidently counsel a customer is necessary for an authorised person. Excellent communication abilities and the ability to persuade clients that investing in stocks is a good idea is important. Getting a lot of clients is also important because revenue will solely be based on commissions generated.

Advantages of Being an Authorised Person

  • The authorised person must make a minimum Initial Investment. The first investment needed to become an authorised individual at a brokerage house is Rs. 10,000. The security deposit for this specific franchise is very minimal.
  • Authorised persons can trade on behalf of their clients, which means they can execute trades quickly and efficiently.
  • Clients may trade in currencies, equities, commodities, futures and options through them. The brokerage company provides free full support for all trading platforms, including pc terminals and electronic trading apps.
  • This approach provides excellent income or commission sharing. The authorised individual receives a revenue share of between 60 and 90%.
  •  Authorised persons can access information and resources to make informed trade decisions.
  • The brokerage firm arranges training courses for an authorised person monthly or every three months to ensure their partners are updated on market changes.

Conclusion

For people in India, investing in the stock market is still thrilling. The range of assets has increased dramatically over the last ten years. An increasing number of individuals now view stock investing as a feasible alternative for long-term financial stability. Without authorised persons, the capital market would not operate as efficiently.

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