Understanding the differences between sub-brokers and authorized persons is crucial for anyone looking to engage in the financial markets. A sub-broker operates under a registered stockbroker, focusing on client acquisition and executing trades on their behalf without direct registration with the Securities and Exchange Board of India (SEBI). In contrast, an authorized person has a broader scope, often directly registered with SEBI, and can perform a wider range of functions, including placing orders and providing comprehensive client services. This understanding influences the choice of intermediary based on specific needs and regulatory compliance.
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Motilal Oswal Sub-Broker Features
Features
RA (Referral Agent)
Digi Partner
Subbroker (AP)
Security Deposit
NA
25-50K
1L-3L
Registration Exchange Charges
NA
NA
YES
Sharing
20-30%
40-55%
60-70%
Services
Track leads and revenue only
Everything in back office from KYC to risk management to reports
Everything in back office from KYC to risk management to reports
Partner Referral
2-3%
2-3%
2-3%
Discount Brokerage Option
No
No
No
Third Party Product
Yes
Yes
Yes
Angel One Sub-Broker Features
Features
RA (Referral Agent)
Digi Partner
Subbroker (AP)
Security Deposit
NA
25-50K
1L-3L
Registration Exchange Charges
NA
NA
YES
Sharing
20-30%
40-55%
60-70%
Services
Track leads and revenue only
Everything in back office from KYC to risk management to reports
Everything in back office from KYC to risk management to reports
Partner Referral
2-3%
2-3%
2-3%
Discount Brokerage Option
No
No
No
Third Party Product
Yes
Yes
Yes
What is Subbroking / Referral Partner?
Regulatory Status
Sub-broker: A sub-broker does not have direct registration with SEBI. They operate under the registration of a stockbroker or trading member, making them dependent on the stockbroker for regulatory compliance.
Authorized Person: An authorized person can be registered directly with SEBI, which allows for a more independent operational capacity. This registration provides a broader scope of services and more autonomy.
Services Offered
Sub-broker: Primarily focuses on acquiring clients, offering investment guidance, and executing trades on behalf of clients. Their role is mainly centered around client acquisition and trade execution.
Authorized Person: Offers a wider array of services, including placing orders, providing investment advice, and maintaining client records. This role involves a more comprehensive set of responsibilities, enhancing client relationships.
Communication
Sub-broker: Acts as a mediator between clients and the registered stockbroker, maintaining a direct line of communication with clients. This position involves significant interaction with both the stockbroker and clients.
Authorized Person: Interacts with clients within the regulatory framework of the stockbroker but has more autonomy in client relations. Their communication is more direct and involves fewer intermediaries.
Registration Process
Sub-broker: Functions under the stockbroker’s registration without a separate SEBI registration. This dependency simplifies their registration process but limits their independence.
Authorized Person: May have their own SEBI registration or operate under the stockbroker’s registration, depending on their agreement. This flexibility allows for varied operational capacities.
Key Differences Between Subbrokers and Authorized Persons
Regulatory Status
Aspect
Sub-broker
Authorized Person
SEBI Registration
No direct SEBI registration
Can be directly registered
Operational Capacity
Dependent on stockbroker’s registration
More independent
Services Offered
Aspect
Sub-broker
Authorized Person
Client Acquisition
Primary focus
Included but not primary
Investment Guidance
Yes
Yes
Trade Execution
Yes
Yes
Additional Services
Limited
Wide array including advisory
Communication
Aspect
Sub-broker
Authorized Person
Client Interaction
Mediated through stockbroker
Direct
Autonomy in Relations
Limited
High
Registration Process
Aspect
Sub-broker
Authorized Person
SEBI Registration
Under stockbroker’s registration
Own SEBI registration possible
Independence
Limited
Flexible
How to Get Started with Subbroking / Referral Partner
Steps to Become a Sub-broker or Referral Partner
Choose a Broker: Select a stockbroker with a favorable referral program that aligns with personal goals.
Complete Registration: Fill out the necessary forms and provide required documentation to become a registered partner.
Market Services: Utilize personal networks, social media, and other platforms to refer potential clients.
Track Earnings: Monitor client activity and earnings through the broker’s partner dashboard.
Best Practices for Success
Leverage Personal Networks: Use your existing connections to find potential clients.
Utilize Digital Platforms: Promote your services on social media, blogs, and other online channels.
Stay Informed: Keep up with the latest market trends and updates to provide valuable advice to clients.
Offer Excellent Customer Service: Ensure your clients are satisfied with your services to encourage repeat business and referrals.
Conclusion
Understanding the distinctions between sub-brokers and authorized persons, along with the latest developments in referral programs, is essential for anyone looking to engage in the financial markets. By leveraging these roles effectively, individuals can build a successful career in stock broking while providing valuable services to clients.
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