Difference Between Sub Broker Franchise And An Authorised Person | Motilal Oswal

Difference Between Sub Broker Franchise And An Authorised Person

Most individuals are quite aware that it is a challenge to engage in share transactions without any aid. A majority of investors seek the help of brokers to do this effectively. If you are an investor, getting help in terms of recommendations for investments and suggestions to get you good returns can be a boon for your financial portfolio. Brokers are experts in the field of trading and investing and if you choose a good one, like Motilal Oswal, you can be assured that you will win in the share markets. Many transactions related to shares are done by individuals called sub brokers. Nonetheless, there are other individuals, such as authorised people, through which the same transactions may be undertaken.

If you wish to start your own business with a stock broker, there are two different options you can choose from. You can either choose to start a sub-broker franchise or become an authorised person. 

Contrary to popular opinion, a sub-broker and an authorised person are not one and the same. They’re slightly different in terms of eligibility criteria, duties and responsibilities, and the amount of initial investment that you’re required to make. 

Therefore, if you’re seriously considering a career in the stock market, it is crucial for you to know the difference between a sub-broker and an authorised person. And that’s what we’re going to be looking at in this article. 

Difference between a sub-broker and an authorised person   

The key differences between a sub-broker and an authorised person have been tabulated below for easy understanding. 

Sub-broker

Authorised Person

Sub-brokers are required to be registered with the Securities and Exchange Board of India (SEBI). Hence, they are considered in a more official role than authorised persons. 

Authorised Persons are not required to be registered with the SEBI. Instead, they need to be approved by the stock exchange. 

They are permitted to trade only in the equity cash market. The role of a sub broker is limited in this sense. 

They are permitted to trade in equity cash, equity futures and options, and currency derivatives segments as well.  

Sub-brokers are subjected to stringent regulatory supervision from the SEBI and the stock exchanges. 

And so, they’re required to comply with multiple compliance and regulatory processes. However, they do not need more complex certifications and permissions from the major authorities that brokers require. 

Authorised persons are subjected to regulatory supervision by the stock broker and the stock exchange only. 

 

Therefore, the compliance and regulatory processes that they need to comply with are not that stringent. 

The registration and other fees that sub-brokers are required to pay is considerably higher than that of an Authorised Person. 

 

For instance, they’re required to pay around Rs. 20,000 as fees to the Securities and Exchange Board of India for the first block of 5 financial years. And Rs. 10,000 for each subsequent block of 5 financial years. 

The registration and other fees payable by Authorised Persons are substantially lower than that of sub-brokers. 

 

For instance, Authorised Persons are only required to pay a one-time registration fee of just Rs. 2,000 to the stock exchange to commence operations.

Conclusion 

If you know the key differences between a sub broker and an authorised person, you will be aware of the importance of one versus the other. It's important to note that the Securities and Exchange Board of India (SEBI) defines a sub broker as “any person who is not a member of a stock exchange who acts on behalf of a stock broker, in exchange for which he is paid a part of the brokerage charged from clients’. On the other hand, an authorised person is defined by SEBI as an “an individual, partnership firm, LLP or body corporate who is appointed as such by a stock broker (including a trading member) and who provides access to a trading platform of a stock exchange as an agent of the stock broker’. 


As you can see from the above, there is quite a bit of a difference between a sub-broker and an authorised person. In addition to the ones explained above, another crucial point of distinction between the two is with regard to the set of onboarding requirements. These requirements tend to be stricter for sub-brokers than authorised persons.

Related Articles:  How To Choose The Right Sub Broker Franchise In India | Key Points to start Business as a Sub Broker | 10 Qualities A Sub Broker Must Have To Become Successful | How to Start & Grow Your Sub Broker Franchise in India

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