The Indian economy is said to be in the bright spot amidst global tensions. It has been steadily growing at positive rates for the past few years. Post-pandemic, people are growing concerned with their money. People are realising the importance of investments and savings in emergencies like COVID-19. It has been a major catalyst for investment avenues like the stock market.
Post-pandemic, the NIFTY 50 index has grown by nearly 42% in the span of three years. However, this growth is accompanied by the demand for the smooth functioning of the markets and its stakeholders. The intermediaries in the market play a key role in the same.
Individuals with market knowledge can grab this opportunity to become sub-stock brokers. However, the question is how to become a sub broker. Don’t worry, here is your answer!
Sub stock brokers in India
In the 1 year span, the demat accounts on both the depositories rose by nearly 32% as of March 2024. When the number of investors increases, the demand for various services also increases. In such a case, intermediaries like brokes help reach them.
The stock brokers are the connecting link between the stock exchange and the investors. However, the sub brokers become a key link between the stock broking firms and the investor clients. Thus, these intermediaries are crucial to smoothen the process of investing for the investors.
Individuals with market knowledge and an inclination towards pursuing a profession in the stock market can explore the opportunity of a sub-broker. Fulfilling certain prescribed criteria can help individuals get a licence from the Securities Exchange Board of India (SEBI). Let’s understand more about this profession.
An interesting read: Understanding the basics of the broking industry and its recent trends
Function of sub brokers
To understand how to become a stock broker or a sub stock broker, one should thoroughly understand its functions and check its suitability with their knowledge. Sub broker’s functions are specifically as follows:
- Customer acquisition – They help stock brokers or brokerage firms connect with investors. Therefore, the acquisition of prospective customers and aligning the aspirations of investors and brokers is the key function of sub brokers.
- Account activation – Sub brokers help open dematerialised (DEMAT) accounts for the acquired customers and facilitate processes, such as Know Your Customer (KYC). Moreover, they collect the required documents from the investors for their accounts.
- Regular services to investors – The day-to-day investment-related services, like processing the order, resolving transaction issues, updating as per norms, etc., are part of the sub broker’s responsibilities.
- Specific stock tips – Sub brokers offer trading calls, investment tips or advice as per the client’s risk appetite and financial goals.
- Research and analysis – These individuals are in direct touch with the investors. Thus, they need to actively look for prospective investment opportunities, updations in the compliance norms, market conditions, etc., while offering service.
- Compliance checking – The SEBI regulators are constantly monitoring markets to avoid any mishap, safeguard the retail investors and maintain the market decorum. Their norms and regulations evolve. Sub brokers stay aligned with such changes and communicate with the investors.
Future trends
As we seek sub-broker as a crucial profession, its future viability becomes important. Some prominent reports suggest that the ongoing rally in the Indian stock markets is positive. Therefore, if all factors affecting it stay constant, the market may rise by 20% in the next five years (as of June 2024). This rise may facilitate opportunities for the stock brokers and sub brokers.
Moreover, the growing digitalisation and number of applications and websites may help sub brokers expand their reach. In addition, opportunities such as new investment products, gradual shifts to advisory services, evolving market dynamics, etc., may catalyse the prospects of the sub broker profession.
How to become a sub broker?
Understanding how to become a sub broker can help individuals plan the fulfilment of the required criteria. Here are certain conditions for becoming a sub broker:
- Sub broker franchise
A person willing to become a sub broker can associate with one brokerage firm. Different brokerage firms have separate sub broking franchise models. They offer assistance to sub brokers. Individuals should check their suitability carefully while selecting the franchise model and brokerage firm.
Some stock broking companies may require a sub-broker with appropriate certification from the National Institute of Stock Market (NISM). Therefore, such eligibility norms or particular brokerage firms should be checked.
- Eligibility
One should fulfil the sub broker eligibility criteria mentioned below:
- Individuals should have passed 12th standard/higher-secondary levels as per the SEBI norms.
- Moreover, a person should be aged 21 years or more.
- If a sub broker is a partnership or body corporate, shall also the above-given conditions.
- Documents
The person or entity willing to register as a sub broker must submit the documents such as an application form, address proof, experience letter (if needed), agreement for the selected stockbroking franchise (given by brokerage firm), etc. Moreover, the processing fees, as mentioned in the registration form, should be paid.
- References
One should provide a recommendation letter from the stockbroking firm, along with two reference letters. In this, one should be from their banker.
- Final submission and SEBI verification
The application, along with fees and other documents, will be submitted electronically. In case of discrepancies, it will be returned to the applicant. Following this, the regulator will verify the documents before accepting them. If required, the application will be sent to the concerned stock broking entity for resubmitting documents.
- Fees
The person or entity getting the registration certificate after August 1, 2006, will pay sub broking fees as follows:
- ₹10,000 for the first five-year block
- After completion of the first block, ₹5000 for subsequent five-year blocks
- Sub broker registration certificate
SEBI will issue the sub broker certificate with a unique registration number. Moreover, the sub brokers name will be added to the registered sub brokers list of SEBI, which can be used by investors to verify a sub broker.
Following this, the stockbroking firm, which is associated with the sub broker, will ensure their functioning, required infrastructure, team, etc., owing to the association.
Must read: Start your brokerage firm in India: The ultimate guide
Benefits of becoming a sub-broker
The individuals willing to be involved professionally may find this profession quite interesting. Moreover, it is accompanied by some benefits, such as:
- One can gain real-time market knowledge and information due to constant research.
- As of FY 2023-24, the brokers and sub-brokers in India earn total fees of ₹45.28 crores, which is nearly 35% up from the previous year. It indicates that the profession has prospective earning opportunities.
- Professionally, the sub brokers can get opportunities to network with market experts.
- After obtaining a registration certificate from SEBI, sub brokers can independently function.
- Compared to the cost of starting a separate brokerage firm, becoming a sub broker can be less costly. Moreover, it can help individuals start and understand the industry from the bottom level.
Conclusion
The sub-brokers act as a key link between the investors and the stock brokers. Moreover, in the recent times of growing investor base and market prospects, it can be difficult for stock brokers to cater to so many investors. Therefore, the sub broker profession may rise in significance. Individuals or entities with an inclination towards the market can explore these professions.
However, one should thoroughly understand how to become a sub broker before applying for the registration certificate. The SEBI has mandated some eligibility norms, documents and other criteria for becoming a sub broker. One should also explore this profession owing to the varied benefits attached to its functions.
Check this out: Stock Market Basics: Minimum Investment and Getting Started
FAQs
- Who are the sub brokers in SEBI?
The sub-brokers are market intermediaries that are in direct contact with investor clients. They are usually confused with brokers. However, sub brokers are a link between investors and brokerage firms. They help facilitate trades, manage accounts, follow the required compliance, and offer stock tips and other services for the investors.
- How to become a sub broker in India?
An individual or entity can start a sub broker business. In this, one needs to associate with a desired and suitable broking firm. After selecting such a suitable franchise model, one can apply for the sub broker certificate. Applicants need to register with SEBI with required documents, recommendation letters and processing fees. Following the acceptance, one needs to pay registration fees, and obtain the certificate.
- What is the licence of a sub broker?
The licence of the sub broker refers to the registration certificate provided by the SEBI following the completion of the registration process. The interested entity or person will apply for registration, fulfil its norms and pay fees. Following the verification, if SEBI approves the application, registration fees should be paid and one will obtain a sub broker certificate.
- How to verify SEBI registered sub broker?
Sub brokers are a direct connecting link for investors to the brokers. Therefore, verifying their authenticity is crucial. Investors should carefully check the sub broker registration certificate of an individual, along with a unique registration number. Moreover, one can also check with the stock broking entity directly whether a sub broker is their appointed intermediary.
- How do you become a broker in India?
In India, the brokerage-related professions may gain more significance in the upcoming days. Individuals or entities willing to work as a broker or sub-broker need to register with SEBI. They will fulfil the required norms, documents and other eligibility details before obtaining a licence or certificate for operation.
