The Authorised Person Business in India – An Overview

The Indian stock market is a vibrant and ever-evolving landscape, offering immense opportunities for investors and financial intermediaries. In recent years, the authorised person business has emerged as a vital component of this ecosystem, bridging the gap between investors and stockbrokers. Authorised Persons play a crucial role in facilitating stock market transactions, providing personalised services, and enhancing the reach of brokerage firms across the country. But what exactly is an authorised person business, and why is it gaining popularity in India? This article explores authorised personal businesses in India, their benefits and challenges, and the regulatory framework that governs them.

Content:

• What is the Authorised Person’s Business?
• Benefits of Starting an Authorised Person Business in India
• SEBI Regulations Relating to the Authorised Person Business in India
• Authorised person Registration Fees for SEBI
• How Much Investment is Required to Start an Authorised Person Business in India?
• Earning Potential for an Authorised Person in India
• Role of an Authorised Person in Stock Market Trading
• Key Challenges Faced by Authorised Persons in India
• Conclusion
• FAQs

What is the Authorised Person’s Business?

The authorised person business involves individuals or entities, known as authorised persons, who act as intermediaries between clients (investors) and stockbrokers. Authorised persons are not members of the stock exchange but are affiliated with a stockbroker who is a member. They assist investors in trading securities, offer market insights, and provide customer support, making it easier for clients to navigate the stock market. The relationship between brokers and authorised persons is symbiotic; brokers rely on authorised persons to expand their client base, while authorised persons leverage the broker’s expertise and infrastructure to provide services to their clients.

Benefits of Starting an Authorised Person Business in India

Starting an authorised person business in India comes with several advantages:

• Low Initial Investment: Unlike becoming a full-fledged stockbroker, which requires substantial capital, becoming an authorised person involves lower costs. This makes it an attractive option for individuals looking to enter the financial market with minimal financial risk.
• Flexible Work Environment: Authorised persons can operate from virtually anywhere, providing flexibility and the ability to cater to clients across different regions without needing a significant physical presence.
• Earning Potential: The authorised person business offers lucrative earning opportunities, primarily through commissions on client trades. The potential for high earnings is tied to the volume of trades and the size of the client base, allowing authorised persons to scale their income.
• Expansion Opportunities: The Indian stock market is growing rapidly, with a rising demand for financial services nationwide. Authorised persons can tap into this expanding market and grow their businesses accordingly.

SEBI Regulations Relating to the Authorised Person Business in India

The Securities and Exchange Board of India (SEBI) is the regulatory body that oversees the functioning of the securities market, including the authorised person business. SEBI’s regulations ensure that authorised persons operate transparently and fairly, protecting the interests of investors. Key regulations include:

• Commission Structure: SEBI has set guidelines on the maximum commission rates that authorised persons can charge, ensuring fairness in the market.
• Investor Protection: authorised persons must adhere to strict guidelines regarding client data privacy, fair dealing practices, and ethical conduct.
• Compliance and Reporting: Regular reporting to SEBI is mandatory, and authorised persons must maintain accurate records of all transactions and client interactions.

Authorised Person Registration Fees for SEBI

Registration with SEBI is mandatory to operate as an authorised person in India. The registration process involves several steps:

1. Application Submission: Prospective authorised persons must submit an application form, along with the required documents, to SEBI through their affiliated broker.
2. Registration Fees: SEBI charges a registration fee that is subject to periodic revisions. This one-time payment grants the authorised person permission to operate under a specific broker.
3. Documentation: Essential documents include proof of identity, address, educational qualifications, and details of the business infrastructure.

How Much Investment is Required to Start an Authorised Person Business in India?

Starting an authorised personal business requires a moderate level of investment. Key financial considerations include:

• SEBI Registration Fees: A one-time registration fee is required to obtain the SEBI license.
• Office Setup: While a physical office is not always necessary, having a professional setup can enhance credibility and client trust. Costs include office rent, furniture, and utilities.
• Technology: authorised persons need access to trading platforms, software, and reliable internet connectivity to manage trades efficiently. This requires investment in technology infrastructure.
• Marketing and Promotion: Authorized persons must invest in marketing and promotional activities, which can include digital marketing, seminars, and networking events, to build a client base.

Earning Potential for Authorised Persons in India

The earning potential for authorised persons in India is significant, driven by various factors:

• Commission on Trades: Authorised persons earn commissions on every trade their clients execute. Higher trading volumes translate to higher earnings.
• Additional Revenue Streams: Besides commissions, authorised persons may earn through bonuses, incentives, and fees for advisory services.
• Case Study: An authorised person managing a substantial client base in a high-trading volume city can earn anywhere from INR 50,000 to several lakhs per month, depending on market conditions and client activity.

Role of Authorised Persons in Stock Market Trading

Authorised persons play a pivotal role in the stock market ecosystem:

• Client Management: They provide personalised services to clients, guiding them through the complexities of stock market trading.
• Trade Execution: Authorised persons assist in executing trades on behalf of clients, ensuring timely and accurate transactions.
• Regulatory Compliance: They ensure all trades comply with SEBI regulations, safeguarding client interests and maintaining market integrity.

Key Challenges Faced by Authorised Persons in India

Despite the benefits, authorised persons face several challenges:

• Intense Competition: The authorised person sector is highly competitive, with numerous players vying for the same client base.
• Regulatory Changes: Frequent changes in SEBI regulations require authorised persons to stay updated and ensure compliance, which can be resource-intensive.
• Market Volatility: The stock market’s inherent volatility poses a risk, as earnings can fluctuate with market conditions.

Conclusion

The authorised personal business in India presents a lucrative opportunity for those looking to enter the financial services sector. While it offers numerous benefits, including low initial investment and high earning potential, it also comes with its share of challenges, such as regulatory compliance and market competition. With the right strategies and a commitment to client service, authorised persons can build a successful business and contribute to the dynamic landscape of the Indian stock market.