The Indian stock market offers various career opportunities for professionals interested in financial services. Among the most commonly used terms are Broker, Sub Broker, and Authorized Person (AP). While these terms are often used interchangeably, they have distinct meanings and responsibilities under India’s securities market regulations.
A broker is directly registered with the market regulator and stock exchanges, whereas a sub broker was the earlier intermediary model that has now largely been replaced by the Authorized Person framework. Today, most brokerage firms appoint Authorized Persons (APs) instead of registering new sub brokers.
If you are planning to start a brokerage business or simply want to understand how India’s brokerage ecosystem works, this guide explains the key differences between these three roles.
What Is a Broker?
A Broker, also known as a Stock Broker, is a company or entity registered with the Securities and Exchange Board of India (SEBI) and recognized by stock exchanges to buy and sell securities on behalf of investors.
A broker provides trading infrastructure, executes buy and sell orders, maintains client accounts, collects brokerage, and ensures compliance with applicable regulations.
Most well-known online trading platforms in India operate as registered stockbrokers.
What Is a Sub Broker?
A Sub Broker was an intermediary appointed by a registered stockbroker to acquire clients and provide brokerage-related services.
Sub brokers helped investors:
- Open trading accounts
- Complete KYC documentation
- Understand investment products
- Access trading services
- Resolve customer queries
Although the term “sub broker” is still widely used, SEBI no longer follows the earlier registration model for new sub brokers.
What Is an Authorized Person (AP)?
An Authorized Person (AP) is an individual or business entity appointed by a registered stockbroker to provide client acquisition and support services under the current regulatory framework.
The Authorized Person performs many of the same functions previously handled by sub brokers, including:
- Client onboarding
- Trading account assistance
- Customer support
- Investor education
- Business development
- Relationship management
Unlike stockbrokers, Authorized Persons do not execute trades directly on stock exchanges. All trades are carried out through the registered broker.
Quick Comparison: Broker vs Sub Broker vs Authorized Person
| Feature | Broker | Sub Broker | Authorized Person |
|---|---|---|---|
| Role | Registered trading intermediary | Earlier intermediary working under a broker | Current intermediary appointed by a broker |
| Registration | Registered with SEBI and stock exchanges | Earlier registration framework (now discontinued for new registrations) | Appointed under the broker and exchange framework |
| Trade Execution | Yes | No | No |
| Client Acquisition | Yes | Yes | Yes |
| Trading Platform | Own platform | Uses broker’s platform | Uses broker’s platform |
| Revenue Source | Brokerage from clients | Share of brokerage | Share of brokerage |
| Regulatory Responsibility | Primary responsibility | Operated under earlier rules | Broker has primary supervisory responsibility |
Responsibilities of a Broker
A registered broker performs several important functions.
Trade Execution
The broker executes buy and sell orders placed by investors on recognized stock exchanges.
Client Account Management
Brokers open trading and demat accounts, verify KYC documents, and maintain client records.
Regulatory Compliance
They must comply with SEBI regulations, stock exchange rules, anti-money laundering requirements, and investor protection guidelines.
Technology Infrastructure
Brokers provide online trading platforms, mobile applications, research tools, and customer support systems.
Responsibilities of a Sub Broker
Before the transition to the AP framework, sub brokers mainly focused on:
- Acquiring new investors
- Opening trading accounts
- Assisting with documentation
- Promoting brokerage services
- Providing customer support
- Building long-term client relationships
They earned a portion of the brokerage generated by their clients.
Responsibilities of an Authorized Person
The role of an Authorized Person is largely similar to that of the earlier sub broker.
Typical responsibilities include:
- Onboarding new clients
- Helping with account opening
- Assisting investors with operational queries
- Promoting brokerage products
- Educating investors about financial markets
- Providing after-sales support
However, Authorized Persons operate under the supervision and responsibility of the registered broker.
Why Did SEBI Replace Sub Brokers with Authorized Persons?
SEBI introduced the Authorized Person framework to simplify market regulation and reduce duplication in the registration process.
The key objectives included:
- Simplifying the regulatory framework.
- Improving accountability.
- Making business expansion easier for brokerage firms.
- Strengthening investor protection.
- Reducing administrative complexity.
As a result, fresh sub broker registrations were discontinued, and brokerage firms now appoint Authorized Persons under the updated framework.
Income Comparison
Broker
Brokers earn brokerage charges directly from clients, along with revenue from margin funding, distribution of financial products, premium trading services, and other value-added offerings.
Sub Broker
Sub brokers earned a percentage of the brokerage generated by clients introduced to the broker.
Authorized Person
Authorized Persons continue to earn through revenue-sharing agreements with their partner brokerage firms. The commission percentage depends on the broker’s business model and the client’s trading activity.
Which Option Is Better?
The right choice depends on your business goals.
Choose a Broker If:
- You want to establish a full-fledged brokerage company.
- You have the resources to meet regulatory, operational, and technology requirements.
- You plan to build your own trading platform and infrastructure.
Choose an Authorized Person If:
- You want to start with lower investment.
- You prefer working under an established brokerage brand.
- You want to focus on client acquisition and relationship management.
- You are looking for a commission-based business with relatively lower operational complexity.
Since the sub broker registration framework is no longer available for new entrants, individuals interested in this field typically become Authorized Persons.
Can an Authorized Person Become a Broker?
Yes. An Authorized Person who gains sufficient industry experience, financial resources, and meets the applicable regulatory and operational requirements may later establish or join a registered brokerage business, subject to the relevant approvals.
Many successful brokerage entrepreneurs began their careers by working with established brokerage firms before expanding into larger financial services businesses.
Conclusion
Although the terms Broker, Sub Broker, and Authorized Person are often used together, they represent different roles within India’s securities market. A broker is a registered market intermediary responsible for executing trades and ensuring regulatory compliance. A sub broker was the earlier intermediary model that worked under a broker, while the Authorized Person is the current framework adopted by brokerage firms following SEBI’s regulatory changes. For most aspiring financial professionals today, becoming an Authorized Person is the practical pathway to entering the brokerage industry without establishing a full-fledged brokerage company.
Frequently Asked Questions (FAQs)
1. What is the difference between a broker and a sub broker?
A broker is registered to execute trades and provide brokerage services directly, whereas a sub broker worked under a registered broker to acquire clients and provide support. The traditional sub broker model has largely been replaced by the Authorized Person framework.
2. Is an Authorized Person the same as a sub broker?
Their day-to-day responsibilities are very similar. However, an Authorized Person operates under the current regulatory framework, while the sub broker function existed under an earlier registration system.
3. Can an Authorized Person execute stock market trades?
No. Trade execution is carried out through the registered broker’s trading platform. Authorized Persons assist clients but do not independently execute trades.
4. Which role has higher earning potential?
A broker generally has the highest earning potential because it directly collects brokerage and offers multiple financial services. Authorized Persons earn a share of brokerage based on their revenue-sharing agreement and client activity.
5. Can I become a sub broker today?
For new entrants, the current pathway is typically to become an Authorized Person with a registered stockbroker, as the earlier sub broker registration model has been phased out.
