FREQUENTY ASKED QUESTIONS – AUTHORISED PERSON

Q1. Who is an Authorised Person?

A1. Any person who is appointed as such by a stock broker (including trading member) and
who provides access to trading platform of a stock exchange as an agent of the stock broker is an
Authorised Person.

Q2. Who can be appointed as an Authorised Person?

A2. An individual, Partnership Firm, Limited Liability Partnership (LLP) and a Body
Corporate meeting the requisite eligibility criteria prescribed by the stock exchange can become
an Authorised Person. The individual should be a resident of India, Partnership Firm should be
registered under Indian Partnership Act, 1932, LLP should be registered under the Indian
Limited Liability Partnership Act, 2008 and Body Corporate should be registered under the
Indian Companies Act, 1956.

Q3. Can registered sub-broker with one stock broker of the Exchange become Authorised
Person with another stock broker of the same stock exchange?

A3. Same person cannot act as sub-broker with one stock broker and as Authorised Person
with another stock broker of the same stock exchange at a time.

Q4. Can a registered Authorised Person share brokerage with the stock broker?

A4. Authorised Person can receive remuneration - fees, charges, commission, salary, etc. for
his services only from the stock broker and shall not charge any amount from the clients.
Accordingly, stock broker can share brokerage with the Authorised Person but shall not charge
any amount directly from the clients.

Q5. Whether tripartite agreement needs to be entered in case of an Authorised Person?

A5. 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. (circular hyperlink to be
provided here). There is no requirement of a tripartite agreement in case of Authorised Person.

Q6. Whether an in-person verification of clients can be carried out by Authorised Persons?

A6. 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.

Q7. 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?

A7. A choice has to be made on becoming Authorised Person or sub-broker and having both
concurrently for same segment is not permitted.
Q8. 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?

A8. 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.

Q9. Can an Authorised Person operate terminal on behalf of the stock broker for executing
broker's proprietary trades?

A9. 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.

Q10. Can a stock broker recover losses from Authorised Person arising out of client’s
(introduced by Authorised Person) trades.

A10. 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.

Q11. Whether Arbitration mechanism of the Exchanges will be available for resolving the
disputes between the stock broker and Authorized Person?

A11. 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.

Q12. Can an Authorized Person open multiple offices?

A12. Yes, an Authorised Person can have multiple offices.

Q13. In case stock broker is willing to submit the application for appointment of Authorised
Person in two or more segments of the Exchange simultaneously, whether a single application
can be submitted for all segments? Similarly whether a single agreement between the stock
broker and Authorised Person will suffice in such cases?

A13. Yes, a single application specifying the segments can be submitted in case stock broker is
seeking approval of the stock exchange for appointment of Authorised Person in two or more
segments together. Further a single agreement between the stock broker and the Authorised
Person will suffice in such cases. However, it is necessary to keep the agreement separate for
each stock exchange.
Q14. 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?

A14. 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.

Q15. 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?

A15. The existing registration process of sub-brokers will continue and the existing Sub-
brokers and Authorised Persons can continue operating without getting registered again as per
the new process.

Q16. Whether Authorised Person will have similar obligations and liabilities, which Sub-
broker has?

A16. The obligations and liabilities of an Authorised Person are similar to that of a Sub-broker.
However, Authorised Person would not have a registration granted by SEBI. Further in all
representations to investors at large name of the affiliated stock broker along with its registration
number should be clearly displayed.

Q17. 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?

A17. 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.

Q18. 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?

A18. A single notice board can be displayed mentioning the details of stock broker, sub-broker
and Authorised Person.

Q.19. 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.
A.19. 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.

Q.20. Whether change in affiliation of Authorised Person from one stock broker to another
stock broker of the exchange permissible?

A.21. Yes, for change in affiliation of Authorised Person from one stock broker to the other
stock broker of the exchange, the application for appointment of Authorised Person shall be
submitted by the new affiliating member alongwith a ‘No objection certificate’ from the earlier
stock broker.