Introduction
Trading in financial markets warrants prudence and knowledge. You need to understand market dynamics and risk management, among others, to be successful. This is where authorised persons can be your guiding light. However, the question is whether they can trade for themselves. Read this blog to find out.
Who are authorised persons?
Stock brokers appoint authorised persons (APs) as their agents. These APs have the permission to carry out transactions on behalf of the brokerage house and offer trading services to anyone interested in stock market investing, such as institutional investors or corporate houses.
​​​​​​​APs offer clients individual trading solutions and assist them with investments that match their goals and risk profiles. To provide these services, an authorised person needs to obtain a certificate of registration from the stock exchange.
Is an authorised person eligible to trade for himself?
Now comes the million-dollar question as to whether you can trade for yourself as an authorised person or not. Yes, you can do so. However, how you can trade differs across these scenarios.
- As an authorised person registered as the broker's customer, you can trade under your name or in the name of your nearby family. These could be your spouse, dependent children, or parents.
- If you have a partnership firm or a limited liability partnership, you can trade under your name and also in the name of your promoters or partners.
In both the above scenarios, you need to fulfill certain other criteria. These include:
- Disclosure of your trading account details to the stock exchange and broker
- Ensuring there's no conflict of interest with the brokerage firm or your clients
You must follow all the regulations applicable to other clients. These include abiding by margin requirements and the code of conduct, among other things.
Benefits on offer
There are several benefits you get when you trade as an authorised person. Some of the major ones are as follows:
- Early access to reports and news
As an authorised person involved in trading, you gain an advantage in several ways. You have access to the broker's research reports and market news firsthand. These can help you capitalise on market opportunities, and you can make intelligent decisions, which can result in favourable trading outcomes. Insider status enables you to make prudent financial moves.
With early access to data, you can gauge shifts in market sentiments, and this approach can help you mitigate risks and bolster returns.
Another major benefit of trading as an authorised person is earning a commission along with investment profits. This can help you make some extra income and can boost your wealth over time.
The commission structure motivates you to research diligently and analyse the available market opportunities. You get incentives to act in the best interest of your clients and prioritise sound investment decisions. It helps foster a sense of trust and establish a strong relationship.
- Find better investment opportunities
With advanced tools and techniques, you can uniquely position yourself to find promising growth opportunities. Advanced analytics and data-driven strategies can help you find gems among various investment options.
Armed with information and tools, you can maximise returns while minimising risks. You can explore various investment portfolios, traditional to alternative, and optimise your portfolio for long-term growth.
Things you need to be mindful of
While trading as an authorised person gives you several advantages, there are certain things you need to be mindful of while trading. These include:
As an authorised person, it's your responsibility to uphold ethical trading practices. Your account is under constant scrutiny, and while you may have a competitive edge, it's essential to avoid any fraudulent activities. Engaging in such stuff can lead to high penalties and tarnish your reputation.
Note that if you trade based on insider information unavailable to the general public, you may face legal action. Therefore, you need to be extremely careful while trading. ​​​​​​​
- No support from brokerage house
While the brokerage house can provide you with valuable reports and news, the ultimate outcome of your trades rests solely on your decisions. It's important to understand that you could potentially face significant losses if your trading decisions go awry. In such situations, it's crucial to remember that you are solely accountable for your actions.
In conclusion
Authorised persons play a vital role in financial markets. While you can trade for yourself, ensure to follow all the rules and avoid conflicts of interest.
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