BSE, NSE Propose Tighter Rules for Brokerage Authorised Persons

MUMBAI — The National Stock Exchange of India (NSE) and the BSE have proposed a tighter regulatory framework for Authorised Persons (APs) of stockbrokerages to strengthen market surveillance, enhance transparency, and protect retail investors.

The consultation paper, drafted in consultation with the Securities and Exchange Board of India (SEBI), introduces higher net-worth thresholds, compulsory certifications, social media disclosure rules, and advanced technological tracking for trading terminals. The proposed measures seek to overhaul the operational rules that have governed market intermediaries since 2009.

Enhanced Financial and Educational Eligibility Norms

Under the proposed regulations, entities and individuals seeking registration as Authorised Persons must meet significantly higher financial and educational qualifications.

Individual APs will be required to be at least 21 years old, possess a minimum qualification of Class XII, and have at least two years of experience in the securities market. They must also fulfill SEBI's "fit and proper" criteria and obtain mandatory certifications from the National Institute of Securities Markets (NISM) covering securities operations, risk management, business segments, anti-money laundering (AML), and combating the financing of terrorism (CFT).

The proposal sets clear financial benchmarks, including:

• Individual Net Worth: A minimum net worth of ₹5 lakh.

• Non-Individual Net Worth: A minimum net worth of ₹25 lakh for corporate entities, LLPs, and partnership firms.

• Security Deposit: A mandatory deposit of at least ₹1 lakh to be maintained with the parent stockbroker.

Conflict Restrictions and Technological Controls

To prevent conflicts of interest and unauthorized operations, the proposal prohibits an Authorised Person from registering with multiple brokers within the same market segment on an exchange. Furthermore, directors or partners of an AP entity cannot act as independent APs on the same exchange or register under close family members to bypass regulatory requirements.

For trading terminals allocated to Authorised Persons, stock exchanges have mandated strict technology-based supervision. Brokerages will need to implement:

• Geo-tagging of physical terminals.

• Biometric Authentication & Facial Recognition for terminal operators.

• CCTV Surveillance with time-stamped footage to serve as proof for client order placements.

Authorised Persons must also disclose all personal bank accounts, demat accounts, websites, and social media handles—including those belonging to spouses and key managerial personnel—used for client acquisition or market commentary.

Brokerage Accountability and Surveillance

The draft framework establishes that parent stockbrokers will be held legally liable for all acts of omission or commission committed by their Authorised Persons. Brokerages must conduct surprise audits, regular physical inspections, and digital surveillance.

Brokers will also be required to build offsite alert systems to monitor:

1. Sharp or unexplained spikes in trading volumes.

2. Recurring or unaddressed client complaints.

3. Extended periods of inactive or zero business generation.

4. Unauthorized pooling of funds or "dabba" (unregistered off-exchange) trading.

Official Sources Section

According to official announcements issued by the exchanges, the joint consultation paper was developed alongside the Securities and Exchange Board of India (SEBI) to update oversight structures. The market public, stockbrokers, and industry stakeholders can submit formal feedback on the draft proposal until August 27, 2026.

Quote Section

"The proposed framework seeks to establish higher standards of governance by introducing stricter eligibility criteria for individuals and entities seeking registration as Authorised Persons," officials stated in the joint paper published by the stock exchanges.

Why It Matters

Authorised Persons act as key channels for retail client onboarding, especially in Tier-2 and Tier-3 cities across India. By enforcing strict capital requirements, anti-money laundering certifications, and digital surveillance tools like geo-tagging, the regulatory bodies aim to eliminate unauthorized financial activities, prevent mis-selling, and ensure that client funds remain strictly protected within regulated brokerage channels.

Key Facts at a Glance

• Minimum Net Worth: Set at ₹5 lakh for individual APs and ₹25 lakh for non-individual entities.

• Mandatory Deposit: APs must maintain a ₹1 lakh security deposit with their stockbroker.

• Terminal Tracking: Mandates geo-tagging, biometric logins, and time-stamped CCTV recording for order placements.

• Conflict Prevention: Prohibits dual affiliations across brokers in the same exchange segment.

• Public Deadline: Stakeholders can submit comments on the consultation paper until August 27, 2026.

Frequently Asked Questions (FAQ)

What is an Authorised Person (AP) in the Indian stock market?

An Authorised Person is an individual or entity appointed by a registered stockbroker to provide investors access to trading platforms on stock exchanges as an agent of the broker.

Can Authorised Persons receive funds directly from investors?

No. Authorised Persons are explicitly barred from collecting or paying client funds or securities in their own accounts. All transactions must go directly through the primary stockbroker.

What NISM certifications are required under the proposed rules?

APs will be required to hold valid NISM certifications in Securities Operations and Risk Management, segment-specific qualifications, and certifications in Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).

How do the proposed rules affect current stockbrokers?

Stockbrokers will face stricter liability for the actions of their APs. They must implement offsite risk alerts, perform surprise audits, monitor social media handles, and verify technological compliance at all AP terminal locations.

Source: National Stock Exchange of India (NSE), BSE Ltd, Securities and Exchange Board of India (SEBI)