Intermediaries play an important role in connecting the investors with registered brokers within the Indian stock market environment. Among such intermediaries, there is an authorized person who plays a significant role in facilitating better market accessibility for clients.
There have been significant changes in this job over the years, particularly since the introduction of new regulations by the SEBI (Securities and Exchange Board of India). In today’s context, becoming an authorized person has become a popular career and business option. Nonetheless, there are certain requirements to be fulfilled for this purpose.
In this guide, we'll explore requirements, eligibility, and exams required to become an authorized person.
What Is an Authorized Person?
An authorized person (AP) is an individual or entity appointed by a stockbroker to act as their agent and to provide clients with access to the trading platforms of stock exchanges such as the NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange).
Important Regulatory Update
Before 2018, this role was often called a sub-broker. However, SEBI removed the sub-broker category. As a result, all these intermediaries switched to the Authorized Person model.
Today, “Authorized Person” is the only legally recognized term, although the old terminology is still used informally.
Eligibility Criteria to Become an Authorized Person
1. Basic Requirements (Individuals):
- Minimum age: 18 years. Some brokers may prefer 21+ for partnerships or entities.
- Minimum education: 10th pass. This is a legal requirement.
- Industry preference: 10+2 or graduation due to market complexity.
- Clean legal and financial record.
- Good reputation and integrity.
2. For Firms/Companies:
- Partners/directors must meet eligibility norms
- Must have proper business registration
- Object clause should permit financial/securities activities
3. Infrastructure Requirements:
- Basic office setup
- Computer systems with internet connectivity
- Ability to support client servicing
Registration Requirements with SEBI and Stock Exchanges
Authorized persons are not directly registered with SEBI but operate under a SEBI-registered stockbroker.
Registration Process
- Partner with a registered broker
- Apply through exchanges like NSE or BSE
- Execute an agreement with the broker
- Submit KYC and verification documents
Key Compliance Rules
- Can be associated with only one broker (single Member ID mapping)
- Cannot handle client funds or securities directly. This includes collecting cash, strictly prohibited
- All payments must go directly to the broker via banking channels
- The broker is responsible for AP’s actions
Mandatory Exams for Authorized Persons
Clearing relevant authorized person exams is essential for operating legally.
Certifications by the National Institute of Securities Markets
SEBI now follows a segment-specific certification approach:
- NISM Series VII: Securities Operations and Risk Management (SORM)
- NISM Series VIII: Equity Derivatives
Segment-Specific Requirement (Important)
You must hold certification for the segment you operate in:
- Currency Derivatives → NISM Series I
- Equity Markets → Relevant equity modules
- Derivatives → NISM Series VIII
You cannot operate in a segment without the corresponding certification.
Validity of the Certification
- Certifications are valid for 3 years
- Renewal required before expiry
Key Roles and Responsibilities of an Authorized Person
1. Client Acquisition & Onboarding:
- Bring in new clients
- Assist with KYC and account opening
2. Client Support:
- Help clients use trading platforms
- Facilitate order placement
3. Market Education (With Restrictions):
- Provide general market information and awareness
- Cannot give stock tips or “buy/sell” recommendations unless registered as:
- Investment Adviser (IA), or
- Research Analyst (RA)
Violating this can lead to penalties under SEBI regulations.
4. Compliance & Documentation:
- Follow SEBI and exchange guidelines
- Maintain proper client records
5. Business Development:
- Grow the broker’s client base
- Build long-term relationships
Digital & Social Media Disclosure Rule
SEBI mandates that all authorized persons:
- Display their registered name and registration number
- Show this information:
- On social media profiles (bio/homepage)
- At the beginning of any financial content or videos
This rule enhances transparency and protects investors from misleading promotions.
