In this article, we have covered every nook and corner of the sub-broker business. This informative article will help simplify the process of How to become a Sub broker in India.
The sub broker business has become one of the most lucrative opportunities in the finance industry.
The Indian stock market is especially attractive to business enthusiasts, allowing them to generate substantial income over time.
For the uninitiated, the Indian stock market has two types of stock brokers: full-service brokers and discount brokers.
You will maximize your benefits only through a full-service broker in the franchise business. This is because you will have complete control of your customers.
Also, you can cross-sell diverse products other than allowing them to trade.
Moreover, to start a subbrokership, a corporate DEMAT account is opened for a company or firm, and a regular DEMAT account is opened for an individual, which is compulsory.
If you want to try your hand in the sub-broker business but need help figuring out where and how to start, read this article.
What is a Sub Broker Business?
A subbroker is like a business assistant for a stockbroker. They are authorized and registered through an exchange.
The sub brokers work under the stock brokers they have been registered with and sell their products to clients.
The clients associated with the subbrokers get access to equity, derivatives, currency, and commodity segments for trading.
They are entitled to receive a revenue share from the brokerage generated through the clients. Revenue sharing differs between stock brokers.
How to Become a Sub Broker?
Here, we have provided the step-by-step process for becoming a sub-broker. We have divided the process into three steps: eligibility criteria and requirements, required documents, and the step-by-step process.
Without further delay, delve into the article and learn the complete process.
Eligibility Criteria and Requirements to Become a Sub Broker
To become a sub-broker to any of the stockbrokers in the finance industry, the individual should satisfy the eligibility criteria below.
Educational Qualification: The individual must have a minimum graduate degree to become a sub-broker.
Age Requirement: To start a career as a sub-broker, the individual must be at least 18 years old.
Citizenship: The individual must be a citizen of India. Without having Indian citizenship, it is not possible to become a sub-broker.
Demat Account: You must open a DEMAT account for a sub-brokership business. This de-mat account has to be opened by the same stock broker whose account you are a part of.
Certification: To start a sub-broker business, you must obtain NISM certification, but you can only do this within one year of taking a sub-brokerage.
You must submit the certification within one year to ensure your license is not canceled.
SEBI Registration: To become a sub-broker, you must register with SEBI. In this process, you will get help from the stockbroker. You only have to provide the necessary documents.
Investment Requirement: For a sub-broker business, your initial investment starts with a minimum of Rs.25,000. The initial investment can go up to Rs.1 lakh.
This security deposit is refundable. Apart from this, you have to pay exchange charges of Rs.500 to Rs.2,500. Furthermore, some stock brokers don’t charge any initial investment from the sub-brokers.
Office Requirement: You must have an office to start a sub-brokership business. Usually, people use co-working spaces to reduce costs.
The monthly expenses to run day-to-day business can be anywhere from Rs.25,000 to Rs.50,000.
This includes your office expenses and employee expenses. Still, by talking to a broker, you can reduce employee and office expenses or even nullify them in the first year of the business.
You can take office once your company is doing well and making decent revenue. If you fulfill the requirements and criteria, you can become a sub-broker.
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Documents Required to Become a Sub Broker
The documents required to open a sub-broker business differ for individuals and partnership firms, LLPs, or private companies.
So, if you want to take a sub-brokership and take it in the individual’s name, then the documents are fewer than the others.
Here are the various documents required to start a Sub broker business in India.
Subbrokership agreement: You will get this agreement from the stockbroker. You have to get Rs.500 stamp paper, complete the notary, and submit it to the stockbroker with your signature.
If you are an individual, your signature will be enough, but if you are a firm, all the directors and partners must sign the document.
Identify Proof: You must submit proof such as Aadhar, a driver’s license, a PAN card, or a passport.
Individuals should submit individual documents; in the case of a company or firm, every company member should submit the relevant documents.
Address Proof: You must submit proof such as Aadhar, driving license, passport, or registered rental agreement.
While individuals should submit individual documents, a document copy of all the directors or partners will be required for a company or firm.
PAN Card Copy: The individual should submit an individual PAN card, and in the case of a company or firm, you have to submit a copy of the company or firm’s PAN card.
Passport-Size Photo: If you are applying as an individual, submit an individual passport-size photo, and if you are using it as a company or firm, submit photos of all directors or partners.
Bank Account Details: Provide proof like a canceled cheque or last month’s bank statement.
Individuals should share personal bank account details, but the company/firm should share the company/firm’s bank account details.
Provide an active bank account because the broker will credit your monthly commission here.
The documents required for only companies or firms are the company incorporation certificate for private companies and the partnership agreement certificate for LLPs/firms.
All these documents should be self-attested with your signature and date.
How to Start Sub Broker Franchise? Step-By-Step Process
You are ready for the process if you have satisfied the eligibility criteria and have the documents we mentioned above. We have curated a step-by-step process for becoming a sub-broker.
Step 1 – Select the Stock Broker
You can review the list of stockbrokers available in the market and choose the broker you think meets your requirements.
For example, you can choose from India’s best stock brokership providers like Motilal Oswal, Angel One, IIFL Securities, Sharekhan, and ICICI Direct.
Step 2 – Connect with the Stock Broker
You must connect with the stockbroker by visiting their website and filling out the form available. Then, you will receive a call within one day.
You can enquire with the telecaller about everything regarding the sub-broker program, such as investment, revenue sharing, office requirements, and becoming a subbroker.
Step 3 – Documents Collection
In this step, you must submit the necessary documents to the stock broker representative. To do so, you must set up a meeting with the stock broker representative at your convenience.
Offline KYC is compulsory for brokerage. In the meeting, the representative will collect all the required documents, which require your signature.
Step 4 – Payment of Security Deposit and Exchange Charges
After submitting the documents, you must transfer the security deposit and exchange charges to the stockbroker. You can do it online or hand over the cheque to the representative.
No Cash Payment in this Process. This process will take 2 to 3 days. This step completes all your work, and the stock broker exchanges and SEBI carry out the rest.
Step 5 – Document Verification by Stock Broker
After the fund transfer, your documents will be sent to the stockbroker team for processing. This team will contact you to confirm the information provided.
The team then creates a file of these documents and forwards it to SEBI and the exchanges.
Step 6 – Document verification by SEBI and Exchanges
After receiving all the documents from the stock broker, SEBI and exchanges will verify them. This process will take 5 to 7 working days.
Step 7 – Sub Broker Code Generation
After successful document verification, SEBI generates a sub-broker code and shares it with stock brokers and exchanges.
Step 8 – Exchange Registration
After the sub-broker code generation, exchange registration is performed. This means that the client can trade and invest in the exchange in which the sub-broker registers.
For example, if the sub-broker doesn’t register for specific commodities, the client cannot trade in them.
Step 9 – Email Confirmation to Sub-Broker
After exchange registration, you will receive a welcome email from the stockbroker. This email will contain your subbroker code and dashboard details, such as login ID and password.
You will also receive a welcome kit with business guidelines at your address. Some big stock brokers will also send a diary and pen. This whole process takes 10 to 15 working days.
How to Become a Sub Broker in India? – Conclusion
To wrap up, becoming a sub-broker can be a rewarding career for business enthusiasts if done right. This sector has excellent scope for growth, as the stock market industry is seeing a daily boom.
Understanding the statistics and strategies of the stock market and its performance can make things work in one’s favor without much effort.
Also, staying updated with the latest market trends is another crucial thing to rule the roost in the sub-broker business.
We hope this article gave you the much-needed insight into how to become a sub-broker. If so, keep returning to this page for more exciting and informative articles.