Who is an authorised person?
Just like a brokerage firm acts as an intermediary between the stock exchange and the investor, an authorised person acts like an intermediary between the brokerage firm and the investor. By definition, an authorised person is not a member of a stock exchange. He is an agent of a broker. However, unlike a broker, an authorised person is not a trading member registered with the SEBI. Therefore, an authorised person is not entitled to brokerage. They get paid in commissions on transactions instead. authorised persons form an important link in the stock market chain as they help investors with the necessary guidance regarding the risks and other security-related concerns.
While acting as an intermediary between the broker and the investor , a authorised person is:
- Responsible for providing the appropriate information to the client about anything that is related to stock.
- Required to update the clients regularly on the various changes that occur in the stock market.
- Is also expected to have a cordial relationship with the clients.
Being a authorised person has several advantages such as –
- In-depth knowledge of the markets. An authorised person knows the market like the back of his hand.
- Access to trading platforms and knowledge resources of the broker.
- Low entry requirement, Being an authorised person does not require a hefty investment. It requires an amount as low as Rs.10,000.
It is extremely important that the authorised person or the agent you are working with is certified. Without the certificate of registration obtained from the Securities and Exchange Board of India (SEBI), they are not authorised to deal with securities. The onus of verifying whether the authorised person is registered with the SEBI lies on the investor.
SEBI Rules for change in authorised person Affiliation
SEBI has issued guidelines on change in authorised person affiliation. According to SEBI, such a change might need approval from the board. However, this does not require any new certificate of registration. There are around seven scenarios that call for a change in authorised person affiliation. They are,
- Authorised person ending his affiliation with one broker and beginning with another.
- Merger/Amalgamation/Acquisition of the broker with/by another broker.
- Broker surrenders
- Change in control or status and constitution/transfer/sales/transmission.
- Brokers are instructed to apply for surrender by SEBI as a result of declaration as defaulter or expelled from the stock exchange.
- Either the broker or the authorised person terminates the contract.
- Change of name of the broker.
The procedure to apply for a change in affiliation according to the SEBI rules for change in authorised person affiliation is as follows.
- The application must be submitted through the broker with whom he seeks the affiliations.
- The exchange ensures that there are no complaints or pending actions or outstanding fees against the authorised person in question.
- The exchange forwards the documents to SEBI.
- SEBI records the changes, and it also implements the changes on the certificate.
- Such a modified certificate is sent to the authorised person.
- Up until the changes are effected on the certificate, the authorised person can continue business with the old broker but once the approval is granted, he has to change to his new broker immediately.
The documents required are as follows
- Recommendation from the exchange and the broker.
- Certificate of registration. In case of loss of the certificate, a copy of the FIR/police complaint along with an affidavit indemnifies SEBI from any damage due to the misplacement/loss of the certificate. The affidavit is to be made on a stamp paper of appropriate value.
- Authorised person’s letter addressed to SEBI seeking change in affiliation.
- No objection certification from the existing broker
- Original and certified agreement between a broker and the authorised person.
The exchange must provide SEBI with all the documents and the authorised persons certificate of registration. The documents should be given to SEBI by the exchange as and when there is a demand. The broker has to make sure that the application for change in affiliation is submitted within 15 days.
These are the various scenarios under which an affiliation takes place and the procedure to get the documents approved by SEBI in case of a change in affiliation.