Who is an Authorized Person and What are His Duties?

If you have been interested in becoming a stock market agent but short of capital, you can think of becoming an authorized person (AP). Are you wondering who is an AP and what role they play?

This article is going to answer all your queries regarding AP. From who is an authorized person to how to become one and what responsibilities you have to take, everything that you need to know before clicking on the application form for becoming an authorized person with your favourite stockbroker.

Who is an Authorized Person?

An authorized Person refers to any person appointed by the brokerage house (trading member) to work as an agent of the brokerage house and offer the products and services to the clients the AP acquires.

The AP has to bring in clients and help them get access to the trading platform of the brokerage house he is working for so that the client can trade. The brokerage paid by the client to the broker is the revenue generated by the AP for the brokerage house.

What are the Responsibilities/ Duties an AP has?

The authorized person has multiple responsibilities towards the stockbroker he is associated with, and the clients he acquires. Let’s take a closer look at all the duties an AP has to fulfil.

Towards the Stock Broker

  • The first duty of an AP towards the stock brokerage house he is associated with is business development. Yes, the primary role of an AP is to acquire clients and offer them the products and services that the stock broker has to generate revenue for the stockbroker.
  • Secondly, while onboarding clients with the stock broker, he must ensure that the client is genuine. He needs to do the primary verification of all the documents the client submits for opening an account with the stockbroker.
  • He also needs to assist them with the account opening process and start trading by downloading the trading platforms and other required resources.
  • An authorized person needs to maintain transparency in all the deals he cracks. He needs to provide all the documents and details received from the client’s end to the stock broker and also inform about all charges, products, and services to the client that the stock broker is offering.

Towards the Clients

  • The AP needs to not only provide the products and services offered by the broker but also assist the clients in trading.
  • Authorized persons must also help the client in fundamental and technical research and analysis of the stocks and the overall market.
  • They can also offer suggestions and guidance regarding market performance.

Who Can be an Authorized Person?

If you want to be an authorized person, you need to do one of the following as they are eligible for becoming an Authorized Person in India as per SEBI guidelines –

  • A resident individual of India
  • Any partnership firm which has been registered as per Indian Partnership Act, 1932
  • LLPs are registered under Indian Limited Liability Partnership Act, 2008
  • Also, any Body Corporate as per Indian Companies Act, 1956.

If you have noticed, there is no HUF, as HUFs are not eligible to become authorized persons in India.

Does an Authorized Person Need to Register with SEBI and Pay SEBI charges?

You must be wondering if the duties of a sub broker and an authorized person are so similar, then why are the names different? The reason is the registration requirement with SEBI.

While a sub broker needs to register with SEBI and pay fees for the same to become a sub broker, the authorized person need not register with SEBI or pay any such fees.

This is why becoming an authorized person in India is less expensive than becoming a sub broker. So, if you have less capital but want to become an agent of the stockbroker to start your career in this market, you can join as an authorized person.

Do You Require NCFM or NISM Certificates to Become an AP?

To become an authorized person, you do not need to clear any NCFM or NISM certification courses. Also, there is no third-party letter required to become an AP. This also brings the cost of becoming an AP down.

How Much Can You Earn as an AP?

With hardly any investments to be made to become an authorized person in India, you have the opportunity to earn a higher commission. Many stock brokers offer commission-based remuneration to the authorized persons, while others provide a fixed remuneration.

Conclusion

Becoming an authorized person can be a cake-walk, but living up to the role of an AP and building a career out of it will require your understanding of the market and most importantly, persistence. You need to be a problem solver to help your clients with multiple trading services and products. The more clients you bring to the stockbroker, the higher commission you can earn.

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