Navigating the stock market requires trust in financial intermediaries who facilitate smooth and regulated trading. Among these intermediaries, authorised persons and sub-brokers are two roles often misunderstood or used interchangeably. However, they have distinct definitions, regulatory structures, and operational models within India’s financial ecosystem.
In this guide, we clarify the difference between authorised person and sub broker, helping investors and aspiring partners make informed decisions based on compliance, structure, and business opportunity.
Who is an Authorised Person in the Stock Market?
An authorised person is an individual or entity appointed by a stockbroker or trading member to act on their behalf. They are registered with the stock exchange (e.g., NSE or BSE) and operate under the broker’s brand, using their infrastructure, systems, and compliance framework.
According to SEBI guidelines, an authorised person cannot operate independently. Instead, they channel orders from investors to the main broker’s terminal, ensuring faster execution and broader market reach for the broker.
Key Features of an Authorised Person:
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Operates under the supervision of a registered stockbroker.
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Requires approval from the respective stock exchange (e.g., NSE, BSE).
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Cannot hold client funds or securities.
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Provides client acquisition and basic support services.
Who is a Sub-Broker?
Before 2018, a sub-broker was an intermediary who facilitated trades on behalf of investors under a registered stockbroker. Unlike an authorised person, a sub-broker had more autonomy, including the ability to manage client portfolios, collect margins, and provide research services.
However, in August 2018, SEBI deregistered the sub-broker category to simplify the compliance framework. Existing sub-brokers were required to migrate to become authorised persons or register as trading members.
Today, the term “sub-broker business” often refers to franchise models or channel partners who function as authorised persons but operate with branding and business incentives similar to the older sub-broker format.
Key Features of the (Now-Obsolete) Sub-Broker Model:
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Acted as a bridge between clients and main brokers.
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Registered separately with SEBI.
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Allowed to collect funds/margins from clients.
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No longer recognized as a separate category post-2018.
Key Differences Between Authorised Person and Sub-Broker
| Feature | Historical Sub-Broker | Authorised Person (Current) |
|---|---|---|
|
SEBI Registration |
Required to be registered with SEBI. |
Does not require direct SEBI registration. Registered with the stock exchange through the main broker. |
|
Relationship |
Worked under a trading member (stock broker). |
Appointed by a stock broker as their agent. |
|
Agreement Type |
Often involved a tripartite agreement (client, sub-broker, stock broker). |
Typically a two-party agreement between the stock broker and the AP. |
|
Liability |
Had more direct liability, though the broker was also responsible. |
The principal stock broker holds full responsibility for the acts of their Authorised Person. |
|
Regulatory Status |
A distinct category of intermediary. |
An extended arm of the stock broker. |
|
Evolution |
Phased out as a distinct registration category by SEBI in 2018. |
The current regulatory framework for such intermediaries.
|
Why This Difference Matters
Understanding the distinction is crucial for:
Investors looking to work with compliant, regulated intermediaries.
Aspiring partners exploring the sub broker business under modern compliance norms.
Stock brokers expanding reach via authorised persons without regulatory duplication.
Today, those interested in partnering with brokers in India must do so as authorised persons, aligning with the post-SEBI 2018 framework. While the term “sub-broker” may still be used colloquially, it no longer holds legal recognition.
Conclusion
While the term sub-broker carries historical weight in India’s stock market landscape, the authorised person model is now the standard regulatory route. It simplifies operations, enhances investor protection, and aligns with SEBI’s vision of a transparent trading ecosystem.
For those exploring the sub broker business, becoming an authorised person under a reputed brokerage is the optimal path forward.
