♦ Who is an Authorised Person?
♦ Who can be appointed as an Authorised Person?
- An individual who is a resident of India
- A Partnership Firm registered under Indian Partnership Act, 1932
- A Limited Liability Partnership (LLP) registered under the Indian Limited Liability Partnership Act, 2008
- A Body Corporate registered under the Indian Companies Act, 1956.
- A Co-operative Society as defined under the Co operative Societies Act, 1912
- Multi State Co-operative Societies Act 2002
♦ Can an HUF be appointed as an Authorised Person?
♦ Can a partner or director of a registered Authorised Person be appointed as an Authorised Person?
♦ Is there any Eligibility Criteria for appointment as authorize person ?
1. Individual :
- Is a citizen of India
- Is not less than 18 years of age
- Has not been convicted of any offence involving fraud or dishonesty
- If he has been suspended or barred by any Stock or Commodity Exchange for a period of more than six continuous calendar months, a period of three years must elapse from the date of completion of the period of the period of suspension before he is considered for a reappointment as an Authorised Person.
- Has a good reputation and character
- Has passed at least 10th standard or equivalent examination from an institution recognized by the Central Government / State Government
2. A partnership Firm, LLP or a body corporate
- If all the partners or directors , as the case may be, comply with the requirements contained in clause 27.1 above
- The object clause of the partnership deed or of the Memorandum of Association contains a clause permitting the person to deal in commodities derivatives contracts.
3. A co-operative society
- If all the Members / Directors by whatever name called of the Managing committee / Governing Body Comply with the requirements contained in clause 20.1 above. However , in respect of caluse at 27.1 above the Exchanges may at their discretion relax the criteria of educational qualifications.
- If the object clause of the Memorandum of Association of the Co-operative society contains a clause permitting the person to deal in commodities derivatives contracts.
- The Authorized Person must have necessary infrastructure , viz. adequate office space, equipment , manpower and such other infrastructural facilities, which the Exchange may prescribe from time to time, to effectively discharge the activities on behlf of the Member.
♦ Is certification and third party reference letters mandatory for Appointment of Authorised Person?
♦ Can a registered Authorised Person share brokerage with the stock broker?
♦ Is it necessary to submit ROF certificate for registration of Partnership firm as Authorised person?
♦ Whether tripartite agreement needs to be entered in case of an Authorised Person?
No, in case of an Authorised Person, as stipulated by SEBI, an agreement has to be entered between stock broker and the Authorised Person in the format prescribed by the Exchange vide circular no. 705 (download ref. no. 13601) dated December 3, 2009. There is no requirement of a tripartite agreement in case of Authorised Person.
♦ In case stock broker wishes to enter into a tri‐partite agreement in addition to the agreement between stock broker and authorised person, can they do so?
Yes, a stock broker may enter into any additional agreement with Authorised Person provided the clauses of such agreements are not in contravention of SEBI/Stock Exchange stipulations. However, whilst applying for appointment of Authorised Person, the uploaded agreement should be strictly as per the format prescribed by the Exchange.
♦ Whether an in‐person verification of clients can be carried out by Authorised Persons?
No, as per SEBI stipulations, in-person verification of clients can only be carried out by employees of the stock broker, hence an Authorised Person who is not an employee of the stock broker cannot carry out in-person verification and same rule is even applicable to a sub‐broker.
♦ Can an Authorised Person become a sub‐broker and can a sub‐broker apply for Authorised Person on Capital Market segment at the same time?
♦ Can an Authorized Person be affiliated with more than one Trading member (TM)?
No, an Authorized person has to be affiliated with only one Trading Member for all / specific segments. A person shall not be appointed as authorized person by more than one stock broker on the same stock exchange. However, the AP can be affiliated with another Trading Member only if the existing affiliated TM is not registered for trading in all/specific segments.
For eg; An applicant wants to apply for CM, FAO and CD segment with TM ‘Beeline Broking Ltd’. However, Beeline Broking Ltd is registered on the Exchange only in CM and FAO segment.
- Apply only for CM & FAO segments with Beeline Broking Ltd and
- For CD segment, the applicant can be affiliated with a TM who is exclusively registered only in CD segment. OR
- The applicant has a choice to be affiliated with a TM who is registered on all 3 segments
♦ Whether change in affiliation of Authorised Person from one stock broker to another stock broker of the exchange permissible?
♦ Whether Authorised Person will have similar obligations and liabilities, which Sub‐broker has?
Yes, the obligations and liabilities of an Authorised Person are similar to that of a Sub‐broker. The Authorised Person shall only be approved by the stock exchange and there is no requirement to seek registration from SEBI. Further in all representations to investors at large, name of the affiliated stock broker along with its registration number should be clearly displayed.
♦ In case a person is a SEBI registered sub‐broker on Capital Market Segment and is also an Authorised Person of Futures & Options and Currency Derivative Segments of the Exchange, whether two notice boards have to be displayed at the office of such person, i.e., one as a sub‐broker office and another one as a branch office of the stock broker?
♦ Whether Arbitration mechanism of the Exchange will be available for resolving the disputes between the stock broker and Authorized Person?
Yes, arbitration mechanism of the stock exchange will be available for resolving the client disputes against the Authorised Person and the stock broker wherein the Authorised Person can be made a party to it. The stock exchange arbitration mechanism will be available in case of any dispute between the stock broker and the Authorised Person.
♦ In case of an individual seeking appointment of Authorised Person and who would be operating from the office of stock broker (with or without terminal), whether such applicant Authorised Person can mention the stock broker’s office address as his office address in the application form.
Yes, if the Authorised Person would be operating from the office of stock broker, the address of the stock broker can be mentioned in the application form seeking appointment of Authorised Person & also necessary undertaking/NOC from the stock broker should be provided along with the address proof of stock broker.
♦ Can the Trading Member apply for cancellation of an Authorised person who is not traceable?
Yes, the trading member can apply for cancellation on ENIT only after completion of one month from the date of serving the termination notice to the Authorised Person. The copy of termination notice mentioning all the details of AP along with POD (Proof of Delivery mentioning the name of AP/TM and date) should be uploaded with the application.
♦ It is necessary to submit a copy of Public notification in case of Cancellation of Authorised Person?
♦ Whether it is possible for a sub-broker to convert as an Authorised Person on Capital Market segment without losing the continuity of business? If yes, whether the KYCs should be entered afresh?
The sub-broker on the Capital Market segment can apply for appointment as Authorised Person alongwith the application for cancellation of sub-broker. The stock exchange shall de-recognise the entity as sub-broker and approve the appointment of the entity as Authorised Person so that the business continuity is not affected. The KYCs need not be entered afresh in such cases.
♦ Can an Authorised Person operate terminal on behalf of the stock broker for executing broker’s proprietary trades?
Authorised Person can operate terminal on behalf of the stock broker. However, in respect of stock broker’s proprietary trading there are restrictions that it can take place only from locations that have been declared so to the stock exchange. It is necessary for a Director level person to be located at the place where proprietary trades are permitted.
♦ Can a stock broker recover losses from Authorised Person arising out of client’s (introduced by Authorized Person) trades?
As per Exchange requirement every client has to be individually registered with stock broker and all funds and securities settlement have to take place between stock broker and the investor. Recovery issues if any between stock broker and Authorised Person would depend on the arrangements that they have entered into.
♦ Whether Arbitration mechanism of the Exchanges will be available for resolving the disputes between the stock broker and Authorized Person?
Arbitration mechanism of the stock exchange will be available for resolving the client disputes against the Authorised Person and the stock broker wherein the Authorised Person can be made party to it. The stock exchange arbitration mechanism will be available in case of any dispute between the stock broker and the Authorised Person.
♦ Can an Authorized Person open multiple offices?
♦ Whether the agreement to be entered between stock broker and Authorised Person should be in the same format prescribed by the stock exchange or it can be modified to provide for more terms and conditions?
The agreement between the stock broker and Authorised Person should be strictly as per the format prescribed by the stock exchange. In case stock broker wishes to stipulate additional terms and conditions, stock broker may include additional clauses clearly stating that these clauses are mutually agreed to between stock broker and Authorised Person taking care to ensure that such clauses are not in contravention with compliance requirements stipulated by Exchange/SEBI.
♦ Whether the sub-broker registration process will still continue? What will be the status of existing registered Sub-brokers and Authorised Persons? Will they have to re-register in new process?
♦ Should be signature match with the PAN ?