How to Become a Sub Broker?

In India, the stock market has lately been experiencing a meteoric rise in popularity. In fact, in the first half of the year 2021 alone, there’s data that clearly shows that millions of Demat accounts were opened by retail individuals. However, retail individuals and institutional investors alike are not allowed to trade directly with the stock exchanges. They need to open a Demat account with a stockbroker to be eligible to buy and sell stocks in the secondary market. The only way to do so is through a stockbroker.

And with an ever-growing number of individuals looking to trade in the stock markets and only a handful of stockbroking houses to service such a huge and expanding client base, the idea of a sub-franchise to help the brokers arose. A sub-broker ensures that more customers come on board the online brokerage train and are assisted in the account opening processes and making investing decisions. The opportunities for sub-brokers have now become more widespread than ever. Sub broking can be an exciting opportunity for aspiring entrepreneurs looking to establish their own businesses. However, without detailed information on how to become a sub-broker, the process may seem difficult.

Continue reading to know all about who a sub-broker is and how to become a sub-broker.

Who Is a Sub Broker?

Learning the process of how to become a sub-broker requires an understanding of what is a sub-broker. According to the definition on the National Stock Exchange, a sub-broker is a person who acts on behalf of a Trading Member (a stockbroking firm) as an agent. A sub-broker(Authorised person) is a person that functions similar to a broker but works as the middle man between two parties; the customer and the main broker. While a stockbroker is a middle man between an investor and the stock exchange, a sub-broker is the middle man between the stockbroker and the investor.

The job of a sub-broker is to mediate between the broker and client and assist the client in various activities such as financial transactions and paperwork. The role of a sub-broker (Also known as Authorised person) is to assist investors in their dealings in shares and other securities via the stockbroking firm. Other duties and responsibilities if one becomes a sub-broker include the following:

  • Actively participating in the business development and sales process of the stockbroker.
  • Maintaining the quality of their client’s trades.
  • Enabling their client base to take informed trading decisions.
  • Giving their client base investment suggestions and stock tips.

The profession of Sub-broking

In the quest to understand how to become a sub-broker, you should have clarity on the sub-broking process. Nowadays, the Indian financial market has shifted towards online brokerage platforms that are equipped with unique features to allow investors to trade in a matter of minutes. However, with such online booking platforms, the candidates wanting to open a Demat account have to figure out the process of opening the Demat account and making investments thereon. Although a majority of Indians are equipped with the needed technical knowledge to open a Demat account online, there remain numerous other individuals who prefer to open and manage their Demat account and investments through an intermediary. The sub-broker is that individual who creates a bridge between the customers (clients) and the online brokers.

Once you become a sub-broker, you work with a specific online brokerage firm and are responsible for finding new customers for them. Furthermore, the sub-broker also assists the clients in making investing decisions and completing related transactions. Once they onboard a new client on the online platform, the sub-brokers are entitled to a predetermined commission on the transactions done by the clients or the sub-brokers on their behalf. The higher the monetary value of such transactions, the higher the sub-brokers earn. However, one thing you should understand, which is vital in the process of how to become a sub-broker, is that a sub-broker is not a trading member of the stock exchange but is licensed to act on behalf of a trading member who has a valid Demat account.

Qualifications to become a sub-broker

One of the most vital factors in the process of how to become a sub-broker in the stock market is to know the required qualifications to be eligible. Although the eligibility criteria for sub-brokers differ with every brokerage firm, the basic qualification requirement remains the same. They are listed below:

  • The person should have completed secondary studies (10+2) as per SEBI’s regulations. However, the higher the studies, the better chances of a successful sub-broking business.

  • Must have basic knowledge of the financial markets, such as the Demat account, trading account, the stocks’ buying and selling process etc along with knowledge about financial transactions.

  • Must have technical knowledge on how to operate computers and basic software such as excel. Furthermore, the technical knowledge of managing online trading platforms is a must.

  • Good communication skills are an added trait as people skills are required to onboard clients and add them to the online brokerage business.

How to Become a Sub Broker?

Now that you’re aware of who a sub broker is, let’s take a look at how to become a sub broker.

  1. Firstly, you’re required to choose the best sub-broker franchise model that you wish to be a part of. One way to go about this would be to carefully read through the various stockbroking houses’ business models and choose the model you like.

  2. Once you’ve chosen the best sub-broker franchise model, check the eligibility criteria. For individuals, the eligibility criteria are quite basic.

  3. Upon ensuring that you satisfy the Sub broker eligibility criteria, the next step is to submit all the duly filled relevant documents to the stockbroking house with whom you would like to enter into a partnership. The list of documents to be submitted is as follows:

a. Sub broker registration application form

b. Agreement between the stockbroking house and the sub broker, duly signed by the applicant

c. Proof of address of the applicant. The address on the proof of address document should match that of the application form. Accepted proof of address documents are listed below.

i. Latest telephone bill

ii. Latest electricity bill

iii. Valid ration card

iv. Valid passport

V. Valid driving license

Vi. Bank statement of the previous month

d. Proof of experience certificate. This is applicable only in cases where the applicant’s qualification is lower than HSC.

e. Other relevant documents as necessary.

4. Along with the submission of all the necessary documents with the stockbroking house, you would have to remit a processing fee of Rs. 2,000 plus GST.

5. Upon receiving the set of documents and the fee, the stockbroker would then forward your application electronically to the exchange and make the payment for processing the sub broker application form on your behalf.

6. Once that is done, all the documents are then thoroughly scrutinized by the exchange to ensure that there are no deficiencies. In the event of any deficiency, the exchange would send the application form and the documents back for correction and subsequent re-submission.

7. Upon successful approval of the application form by the exchange, you would then be required to remit the requisite SEBI registration fees to the stockbroker, who would in turn remit the same to the exchange on your behalf.

8. After the receipt of the SEBI registration fees, you will receive a sub broker registration certificate from SEBI and a registration number.

Upon the receipt of the registration certificate, you are then officially considered to be a sub broker.

Conclusion

Now that you know how to become a sub-broker in India, you can go ahead and choose a profession that can allow you good earnings through commissions.

IIFL offers one of the best sub-broker franchise models in the entire Indian stockbroking scene. A strong brand name, an intuitive tab-based advisory platform, cutting-edge trading platforms, and best in class research reports are some of the unique features that you get to experience by partnering with IIFL.

By choosing IIFL as a business partner, you also get to enjoy several other benefits such as a high revenue-sharing model, personal assistance, personalised branding, investor awareness programs, and access to a robust back-office infrastructure and risk management systems. As a sub-broker with IIFL, you also get access to an extensive product range that includes not only equities and mutual funds but also NCDs, bonds, and other insurance products. With more than 15,000 franchise partners and over 40 lakh customers, IIFL’s sub-broker program is without a doubt one of the best sub-broker franchise models in India.

Partner with IIFL now and enjoy unlimited possibilities!

Ans: As sub-brokers are not trading members, they can not charge a brokerage. However, they are given a commission on the total transaction value done by their clients. There is no cap on the amount of commission a sub-broker can earn.

Ans: Yes, you can trade through your Demat account and own capital and realise profits like a normal retail investor.

Ans: You can apply for getting a certificate from the National Institute of Securities Market (NISM). You will have to clear an exam including modules such as equities, commodities, mutual funds etc.

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