What is a Sub-Broker? Meaning, Role, and How to Become One

What is a Sub-Broker?

A sub-broker or an authorised person is an intermediary who operates under a stockbroker to carry out stock market transactions for clients. While a full-fledged broker has direct access to stock exchanges, a sub-dealer does not have direct access to stock exchanges but assists investors in placing trades through their associated broker. A sub-broker is officially identified by the SEBI and other regulatory organizations. 

A sub-broker franchise works under the license of a stockbroker and earns a commission on client transactions. Their main task is to guide investors in opening an account, trading, and knowing the trends of the market.
 

Role and Responsibilities of a Sub Broker

The sub-broker's role is multifaceted and demands strong market knowledge, communication skills, and client management skills. The following are some of the important responsibilities:

• Client Acquisition and Management

A sub-broker is tasked with the provision of new clients to the brokerage firm. They bring potential investors to stock market opportunities and help them in opening trading accounts and Demat accounts.

Strong client relations are a must. A sub-dealer should know the investment objectives of their customers and offer appropriate market information.

• Trade Execution and Support

As a sub-broker lacks direct access to the market, it enables trade execution by sending the client orders to the stockbroker. This will make trades smooth and effective as per the regulations of the exchange.

Moreover, they help the investors in using the trading platforms and executing orders accurately.

• Investment Guidance and Market Insights

Though sub-brokers are not licensed financial advisors, they give general market analysis and trading tips based on research. They assist clients in finding potential investment opportunities and effectively managing their portfolios.

• Account Opening and Documentation

One of the most important tasks of a sub-dealer is helping investors fill out the required documentation to open a Demat and trading account. This involves identity proof verification, KYC formalities, and compliance with SEBI regulations.

• Customer Support and Query Resolution

Investors may require assistance regarding trading platforms, transactions, and technical matters. A sub-broker assists clients, responds to their queries, and resolves any problems they encounter during trading.

• Regulatory Compliance and Reporting

A sub-broker has to ensure all client transactions are in line with SEBI guidelines. They keep records of trades, facilitate on-time documentation submission, and comply with all regulatory requirements.
 

Benefits of Becoming a Sub Broker

It is a low-investment business with high returns. Following are some of the most important benefits:

• Low Initial Investment and High Returns

Unlike the capital-intensive full-fledged brokers who need high amounts of money, a sub-broker franchise can be initiated with minimal investment. Major infrastructure and technology expenses are usually borne by most stockbrokers, keeping financial risks to a minimum.

Even with the low investment, a sub-dealer can make good commissions depending on the trading volume of their clients. The more active the clients are, the more they earn.

• No Direct Market Risk

A sub-broker does not invest their capital in the market but serves as a facilitator to clients. This minimizes exposure to stock market risks while still enjoying trading activities.

• Association with a Reputed Stockbroker

Collaborating with a reputable stockbroking company adds credibility. It attracts clients and builds trust in the financial community. Most investors opt to deal with authorised individuals associated with reputed brokers.

• Flexible Work Model

A sub-broker can work independently, fixing their working schedule. The flexibility helps people manage their business along with personal schedules. Some stockbrokers also offer remote working facilities, allowing clients to be managed from anywhere.

• Access to Advanced Trading Tools

Sub-brokers of most brokerage companies get access to sophisticated trading platforms, market research reports, and analysis tools. It assists in presenting better insights to clients and increasing trading efficiency.

• Chances for Expanding Services

Sub-brokers of many such companies provide more than stock trade services. Mutual fund distribution, insurance sales, and loan facilitation are done by some, and they charge extra commissions for these financial instruments.
 

How to Become a Sub-Broker in India?

To become a sub-broker in India, one has to follow a systematic process as defined by stock exchanges and regulatory bodies. Here is a step-by-step guide based on the process adopted by top stockbrokers such as 5paisa.

Step 1: Select the Correct Sub Broker Franchise Model

The first step is to select a sub-broker franchise from a reputed stockbroking firm. Different brokers offer various business models with different commission structures and support systems. Research and compare options before finalizing a brokerage partner.

Step 2: Check Eligibility Criteria

Each brokerage firm has specific eligibility criteria for sub-brokers. Generally, the requirements include:

• Minimum qualification of 10+2 (Higher Secondary Certificate)
• Basic understanding of the stock market
• Good communication and client-handling skills
• Previous experience in the financial sector (preferable but not essential)

Step 3: Prepare and Submit Documents

You must submit the following documents to become a sub-broker:

• Sub broker registration application form
• Signed contract with the stockbroking company
• Identity proof (Aadhar Card, PAN Card, Voter ID, etc.)
• Address proof (Electricity bill, Passport, etc.)
• Experience certificate (if any)
• Other documents as per brokerage requirements

Step 4: Submission of Application and Approval

After all fees and documents have been submitted, your sub-broker application is submitted by the stockbroker to SEBI for approval. All details are checked by the exchange before consent is given.

Step 5: Verification of Documents

The stock exchange examines all the documents submitted. In case of any mistakes or incomplete details, the application is returned for rectification. After the verification is done, the exchange proceeds with the approval process.

Step 6: SEBI Registration and Payment of Fees

Once you have received the approval, you must pay the SEBI registration fees to complete the registration process. The stockbroker will pay these fees on your behalf.

Step 7: Get Sub Broker Registration Certificate

After successful registration with SEBI, you will be issued a sub-broker registration certificate and a unique registration number. This formally authorizes you to work as a sub-broker under the selected stockbroker.

By doing these steps, you can become a registered sub-broker and begin helping investors in stock market trading.
 

Conclusion

Being a sub-broker is a fulfilling profession for individuals interested in the financial market. It provides them with a stable income in the form of commission and valuable market exposure.

While full brokers need to invest heavily in capital or have direct access to an exchange, a sub-dealer does not. Instead, they work under the auspices of a registered stockbroker and help their clients make trading and investment choices.

If you are looking to become a stock broker, becoming a sub-broker may be an intelligent and inexpensive route to getting involved in the field. Having a good stock broker partner, proper networking, and hard work can help you open a profitable venture in the finance sector.