If you have ever worked with a stockbroker through a local agent or franchise, you have likely interacted with an Authorised Person, even if you did not know it by that name. But who exactly oversees these individuals and entities? Who holds them accountable if something goes wrong?
This guide breaks down the regulatory framework governing Authorised Persons in India, who regulates them, what rules they must follow, and what it means for investors.
What Is an Authorised Person?
An Authorised Person (AP) is anyone appointed by a registered stockbroker (also called a Trading Member) to provide clients with access to a stock exchange's trading platform. They act as an agent of the broker, not independently, and serve as the last-mile link between the brokerage house and the investor, particularly in smaller cities and semi-urban areas.
An AP can be:
- An individual who is a resident of India
- A partnership firm registered under the Indian Partnership Act, 1932
- A Limited Liability Partnership (LLP) under the LLP Act, 2008
- A body corporate registered under the Companies Act
Importantly, an HUF (Hindu Undivided Family) cannot be registered as an Authorised Person.
Who Regulates Authorised Persons in India?
The regulation of Authorised Persons in India operates at two levels: the overarching framework is set by SEBI (Securities and Exchange Board of India), while day-to-day registration and compliance oversight are handled by the Stock Exchanges (primarily NSE and BSE).
1. SEBI - The Apex Regulator:
SEBI is the primary securities market regulator in India, established under the SEBI Act, 1992. While Authorised Persons do not register directly with SEBI, the regulator sets the foundational rules within which all APs must operate.
SEBI's key role in authorised person regulation includes:
- Setting the framework: SEBI issued a landmark circular on Market Access through Authorised Persons, which outlined the minimum eligibility criteria, conduct standards, and accountability norms that all APs and their affiliated brokers must follow.
- Discontinuing the Sub-Broker model: In a significant regulatory overhaul, SEBI's Board decided in June 2018 to discontinue the sub-broker category as a separately registered SEBI intermediary. All sub-brokers were directed to migrate to the Authorised Person model by March 31, 2019. This shift meant that SEBI would no longer directly register this category — responsibility moved to the exchanges.
- Issuing codes of conduct: SEBI prescribes the rights and obligations for stock brokers, authorised persons, and their clients. These govern how APs interact with investors, how funds and securities are handled, and what disclosures must be made.
- Investor protection: APs are covered under SEBI's broader investor protection norms. Any grievances involving an AP can be escalated through the stock exchange's arbitration mechanism or SEBI's SCORES (SEBI Complaints Redress System) platform.
2. Stock Exchanges - The Direct Regulators:
For practical, operational regulation, Authorised Persons are registered with and regulated by the stock exchange to which their Trading Member belongs, typically the NSE or BSE.
This means:
- An AP is not required to seek registration from SEBI
- The exchange where the affiliated broker is registered is responsible for approving and overseeing the AP
- Separate registrations may be needed for different trading segments (e.g., Capital Market, Futures & Options, Currency Derivatives)
The exchanges handle:
- Registration and Approval: The stockbroker submits an application on the exchange portal (such as NSE's ENIT system) for AP registration. The exchange reviews the application, verifies documents, and approves the appointment.
- Ongoing Compliance Monitoring: Exchanges issue circulars and guidelines that APs and their brokers must comply with. For instance, NSE's Circular No. NSE/COMP/63628 governs the affiliation rules for APs; an AP must generally be affiliated with only one Trading Member across all or specific segments.
- Cancellation and Disciplinary Action: If an AP violates regulations or a broker wishes to terminate the arrangement, the exchange processes the cancellation. If the action is disciplinary in nature, the AP must be simultaneously canceled from all exchanges where it is registered.
- Arbitration: The exchange's arbitration mechanism is available to resolve disputes between a stockbroker and an AP, or between a client and the AP (with the broker as a party). This provides investors with a structured grievance redressal channel.
The Stockbroker's Accountability
One critical aspect of authorised person regulation is that the stockbroker bears ultimate responsibility for the actions of their Authorised Persons.
SEBI's framework explicitly states that the broker is responsible for all acts of omission and commission by the AP. This means investors have a direct line of accountability; even if a problem arises at the AP level, the registered stockbroker cannot disclaim responsibility.
Some key conduct rules that flow from this accountability:
- All client funds and securities must flow directly between the Trading Member and the client - never through the AP's own account.
- Contract notes, statements, and other official documents must be issued by the broker, not the AP.
- An AP can assist administratively (such as helping with KYC paperwork), but cannot conduct in-person verification of clients; that is reserved for the broker's own employees.
- The AP must prominently display the affiliated stockbroker's name and SEBI registration number in all client-facing communications and at their office premises.
- The AP can only receive remuneration from the stockbroker. They cannot charge clients directly.
Eligibility Criteria for Becoming an Authorised Person
SEBI and the exchanges have prescribed minimum eligibility conditions:
For individuals:
- Must be a resident of India
- Must be at least 18 years of age
- Should have passed at least Class 10 (matriculation)
- Must not have been convicted under the Indian Penal Code or any securities law
- Must be of good reputation and standing
For firms and corporates:
- All partners or directors must individually meet the above criteria.
- The object clause of the partnership deed or Memorandum of Association (MOA) must explicitly permit the entity to deal in securities.
Key Compliance Requirements
- Affiliation Restriction: An AP can generally be affiliated with only one Trading Member across all segments. If a broker is not registered in a specific segment, the AP may associate with another Trading Member exclusively for that segment.
- No Dual Role: An AP cannot simultaneously be a sub-broker on the same segment. A choice must be made between the two roles.
- Agreement with Broker: The Trading Member–Authorised Person (TMAP) Agreement must be executed on a minimum stamp paper of ₹100 (or as per applicable state stamp duty). The agreement is valid for six months from the date of execution and must be renewed thereafter.
- Word Restrictions in Name: As per NSE Circular No. NSE/COMP/55716 (February 22, 2023), APs cannot use certain words in their business name, such as "Advisors," "Asset Management," "Wealth," or "Portfolio Management", as these could mislead investors into thinking the AP is registered to provide services beyond broking.
- Premises and Infrastructure: APs must have adequate office space, equipment, and manpower. If an AP operates from the broker's office, the broker's address may be used, along with a No Objection Certificate from the broker.
Investor Protections Under the AP Framework
From an investor's standpoint, the regulatory structure offers several safeguards:
- Your money never passes through an AP's account. All settlements are directly with the registered broker.
- The broker is liable for the AP's conduct, giving you a well-capitalized, SEBI-registered entity to hold accountable.
- Grievance redressal is available through the exchange's arbitration mechanism or SEBI's SCORES portal.
- The AP must display the broker's registration details, so you always know the regulated entity behind the service.
- APs cannot solicit funds or securities in their own name, reducing the risk of fraud.
