Authorised Person Exam

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In India, the term “Authorised Person” was introduced to replace the term “Sub-Broker” as part of regulatory changes by the Securities and Exchange Board of India (SEBI). This change aimed to streamline and strengthen the regulatory framework for intermediaries in the securities market. Authorised Persons are individuals or entities who are authorised by stockbrokers or trading members to represent them and provide various services related to trading and investment in securities. These services may include order placement, advisory services, and other activities related to trading on stock exchanges. To become an Authorised Person in India, individuals or entities typically need to meet specific regulatory requirements set by SEBI and undergo relevant training, an authorised person exam and certification as required by the respective stock exchange and a broker with whom they wish to be associated. The requirements and procedures may vary depending on the stock exchange and broker.

Requirements to be an Authorised Person in India

Becoming an authorised person in India involves meeting certain regulatory requirements and typically requires clearing the authorised person test along with a collaboration with a registered stockbroker or trading member. 

These requirements and procedures are subject to change and may vary based on the specific stock exchange and broker with whom you intend to work. Let’s take a look at some important requirements for authorised persons in India-

  • Eligibility Criteria:

You should be an individual or entity eligible to participate in the securities market as per SEBI regulations.

You must also meet any additional eligibility criteria set by the stock exchange and the broker with whom you wish to become an authorised person.

  • Registration with a Stockbroker:

Finding a SEBI-registered stockbroker or trading member who is willing to sponsor your application is crucial. This sponsoring entity will act as your intermediary in the securities market.

  • Agreement and Documentation:

The agreement with the sponsoring stockbroker is a legally binding document that outlines the terms of your engagement. It typically covers aspects such as the sharing of revenues, compliance responsibilities, and the termination process.

  • Training and Certification:

Training programs aim to provide you with a comprehensive understanding of the securities market. You may need to attend courses and seminars to acquire the necessary knowledge.

Certification, often from organizations like NISM, demonstrates your competence and knowledge in areas such as market operations, derivatives, or compliance. The sub-broker exam is one such certification. 

  • Compliance and Due Diligence:

Ensure compliance with all regulatory and compliance requirements set by SEBI, the stock exchange, and the sponsoring stockbroker.

Go through a due diligence process as part of the onboarding procedure, which may include background checks regarding previous employments, certifications, any unlawful activities and financial assessments.

  • Capital Requirements:

Maintain the minimum capital requirements specified by SEBI and your sponsoring stockbroker. The capital requirements can vary depending on your trading activities and the type of services you offer.

Having sufficient capital ensures that you can meet financial obligations and manage potential losses.

  • Infrastructure and Technology:

Having the right infrastructure and technology is essential for efficient trading and client service. This includes access to trading platforms, real-time data feeds, and reliable communication systems.

Depending on your business model, you may need to establish a physical office space that complies with regulatory standards as well as hire maintenance staff.

  • Client Acquisition and Services:

Building a client base is crucial. You may need to employ marketing and outreach strategies to attract clients.

Services may include assisting clients with stock trading, providing investment advice, portfolio management, and executing orders on their behalf.

  • Continuous Compliance:

Staying compliant with changing regulations is an ongoing process. This requires regular monitoring and updating of your operational procedures.

You should also keep abreast of any changes in SEBI rules and stock exchange guidelines.

  • Reporting and Record-Keeping:

Accurate record-keeping is essential for transparency and regulatory compliance. Maintain detailed records of client transactions, communications, and financial activities.

Regularly submit reports to your sponsoring stockbroker and regulatory authorities as required. These reports help in regulatory oversight and maintaining checks and balances.

  • Risk Management:

Implement risk management practices to protect your clients and your business from market volatility and unexpected events.

This includes setting risk limits, monitoring positions, and having contingency plans in place.

Also Read: Risk Management in Intraday Trading

  • Renewal and Review:

Periodically review your operations to ensure that you continue to meet regulatory standards.

Also renew your authorised person registration as needed, following the renewal process specified by SEBI and the stock exchange. This often involves demonstrating continued compliance.

Please note that the specific requirements and processes can vary depending on the sponsoring stockbroker, the stock exchange, and changes in regulatory guidelines, eligibility and the authorised persons exam. Therefore, it’s essential to maintain open communication with your sponsoring entity and regularly check for updates in regulatory requirements to ensure that you remain in compliance throughout your career as an Authorised Person in India.

Also Read: Roles And Functions Of Sub brokers

Conclusion

Authorised persons are instrumental in expanding market access, especially for retail investors, and their expertise aids in informed decision-making. Their compliance with SEBI regulations enhances market integrity and safeguards investor interests. Authorised persons, as intermediaries, contribute significantly to market liquidity, efficiency, and accessibility, making them essential pillars of India’s financial landscape.

They play a vital role in India’s securities market by bridging the gap between investors and stockbrokers. To become an authorised person, individuals or entities must meet rigorous criteria, including compliance, training, and clearing the authorised person exam. This process ensures that authorised persons are well-equipped to provide essential services, including order placement, advisory, and risk management.

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