The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have jointly released a consultation paper proposing significant changes to the regulatory framework for Authorised Persons (APs), aiming to strengthen investor protection and improve supervision. According to the consultation paper, these changes have been prepared jointly by the exchanges in consultation with the Securities and Exchange Board of India (SEBI), with public comments invited until August 27, 2026. The proposed framework focuses on making stock brokers more accountable for the activities of their authorised representatives through stricter eligibility requirements and enhanced compliance measures, as stated in the consultation paper.
Under the proposed framework, individuals seeking to become Authorised Persons will face stricter eligibility criteria including educational qualifications, work experience, mandatory NISM certifications and minimum net worth requirements. As reported in the consultation paper, individual APs will be required to maintain a minimum liquid net worth of ₹5 lakh, while partnership firms, LLPs and body corporates will need a minimum net worth of ₹25 lakh. Additionally, every AP will have to maintain a minimum deposit of ₹1 lakh with the stock broker, representing a significant increase in financial requirements for authorised person status. The new proposal mandates that APs of stock brokers who provide access to trading platforms as agents must have valid certification on securities operations and risk management from NISM, along with certifications on business segments for which they are registered, and certifications on anti-money laundering and combating the financing of terrorism. The minimum age for individual AP registration has been raised to 21 years from 18 years, with applicants required to have passed Class 12 or equivalent examination and possess at least two years of work experience with a stockbroker or in the securities market.
The proposed changes introduce tighter compliance requirements for Authorised Persons, including mandatory disclosure of all bank and demat accounts during onboarding and details of business-related websites and social media handles. According to the consultation paper, brokers will be required to conduct social media screening of APs and their promoters/directors/partners through web crawler or web search and maintain proof of these activities. For APs using trading terminals, the exchange has proposed geo-tagging of terminals, CCTV surveillance at terminal locations and face recognition or biometric authentication before terminal access. The paper emphasizes that appropriate technological controls such as geo-tagging must be implemented to monitor and restrict misuse of terminal access, while APs shall implement face recognition or biometric authentication technology for accessing terminals. For enhanced transparency, APs will be required to disclose their bank and demat accounts to brokers during onboarding and give access of their statements to the brokers. The consultation paper prescribes additional safeguards including centralised storage of pre-order placement evidence and stringent data-security standards for trading terminals.
The proposed framework places greater responsibility on stock brokers, requiring them to be responsible for all acts of omission and commission by their APs and their employees. As reported in the consultation paper, brokers will be required to conduct regular inspections, surprise audits and generate offsite alerts to identify unusual trading activity, recurring client complaints, social media violations and other compliance risks. To ensure effective supervision, brokers have been mandated to generate offsite alerts during events like recurring client complaints, sharp, unexplained changes in client trading volume, and nil or negligible business activity generated by APs. The proposed regulations specify that APs will be restricted to one broker for a market segment on an exchange and that directors/partners of an AP cannot be appointed as AP on the same exchange. Additionally, APs will not be allowed to act as a dealer with any other stock broker or authorized person on the same exchange, or register in the name of family members where they are directly involved. According to broking industry officials, the framework significantly expands compliance responsibilities, requiring brokers to conduct surprise and mystery audits, generate monthly off-site alerts, monitor APs' social media activities, physically verify AP premises before onboarding, organise annual compliance training, make recorded welcome calls to AP-sourced clients warning against promises of assured returns, and publish details of active and cancelled APs along with complaint statistics on their websites.
According to broking industry officials, the proposed changes would lead to additional costs for both APs and brokers. "The proposed framework introduces a significant entry barrier for authorised persons by prescribing a minimum liquid net worth, deposits with brokers, and enhanced infrastructure requirements. Unlike a balance sheet-based net worth, the proposed liquid net worth excludes fixed assets and unlisted securities, making compliance more demanding," said D P Singh, head of compliance at Ventura Securities. The proposed framework seeks to replace the existing regulatory framework for authorised persons, introduced in 2009, to strengthen supervision of APs and improve investor protection. As per industry sources, the tighter norms could force many small and mid-sized APs out of business due to increased compliance costs. However, a senior official at a broking firm noted that the proposal aims to prevent misuse of clients' money by APs and address growing risks from some authorised persons collecting money from clients or promising assured returns, both prohibited under securities regulations.
