How to Close a Sub Broker Business in India? – Reasons, Process & more

In this article, you will learn step by step process on how to close a sub broker business in India. A Sub-broker businesses have seen a tremendous boom thanks to the rise of digital trading platforms.

With more people showing interest in trading and investing business, people have chosen broker business as a potential profession.

However, not everyone can find success in business for diverse reasons. If you were unsuccessful in the sub-broker business and want to close it midway, this article is for you.

We will discuss why sub-brokers wish to close their business and how to cancel a sub-broker business.   Also, we will tell you how to take back your security deposit.

How to Close a Sub Broker Business in India

Reasons to Close a Sub Broker Business

There are two significant reasons why a sub-broker wants to close his business. We shall discuss it here in detail for you.

Sub brokership business is not doing well

If the sub-brokership business is not doing well and is not seeing any profits, a sub-broker is free to close the business anytime.

Also, if the subbroker needs money, he can get a refund of their security deposit amount, which is between Rs.25,000 to Rs.1 lakh.

Note that this amount changes from broker to broker. The sub-broker can close the business and receive a refund of their security deposit.

Wants to Switch to another Subbrokership

If a sub-broker wants to partner with a different stockbroker, they can close their business with the current stockbroker and obtain a subbrokership with the new stockbroker.

This generally happens when the sub-broker finds another stock broker who offers a better commission than the current broker.

In this case, the sub-broker has two options:

  1. First, he can take other brands’ sub brokership in the name of any trusted family member. This is considered a best practice. But you can adopt the second option if you don’t have trusted people to transfer the name.
  2. Close the existing sub-brokership; move all the clients to the other brand’s sub-brokership business. Though this is a tedious process, you can go with it if you are getting a minimum profit of Rs.20,000 to Rs.30,000 monthly by dealing with other brands. Also, most of the sub-brokers do it.

How to Close a Sub Broker Business? Step-by-Step Process

It is very tedious to close a sub-broker business. It takes 30 to 60 working days, which varies from broker to broker.

There is a lot of verification in this process, which goes to SEBI, which is why it is lengthy. There are 11 steps in this process, and we shall discuss each in detail.

Step 1: Email your RM or Cancellation Team regarding the Closure of Sub Broker Franchise

You must write an email from your registered email ID to your relationship manager or sub-broker cancellation team stating that you are willing to close the sub-broker business.

Step 2: Call the RM and ask for Franchise Cancellation Document

After leaving a mail, you can immediately call the RM and tell them that you have mailed them regarding the closure of the subbrokership.

First, they will ask questions and then connect you to the cancellation or closure teams.

The closure team will also ask you the same questions as to why you want to close the business. Tell them your reason and ask them to share the franchise cancellation document.

You will receive the cancellation document by email within two to three days. If you didn’t get it, you can follow up by calling again.

Step 3:  Print the Document on Rs.600 Paper and Get it Notarized

First, you must get the document printed on Rs.600 stamp paper. Sign the document in the required columns and then get it notarized.

For safety purposes, copy the photo of the stamp paper and take pictures of all the pages from your phone.

Step 4: Mail the Stamp Paper Document to the Broker’s Head Office

You must courier or speed post the stamp paper document to the broker’s head office. For your convenience, you can also email the RM and cancellation team.

With this step, your involvement is over, and the stockbroker and SEBI will do the rest.

Step 5: Document Verification

The subbrokership operations team will connect with you by phone and verify all the information secured on the document.

This operations team will verify all the documents & then it will be sent to subbrokership accounts team.

Step 6: Prepare Account Statement for Deposit Refund

The subbrokership accounts team will first prepare an account statement. This team covers 3 types of fees in this.

First, sub-broker cancellation fees differ from broker to broker, which are Rs.10,000 to Rs.25,000 + GST.

Stock brokers deduct this fee to process the cancellation. Second is exchange cancellation fees, which are Rs.1,000 to Rs.1,500 + GST. Thirdly, any amount pending with clients is also included.

For example, if your clients have a negative balance with the stock broker, that amount will also be deducted from your security deposit.

It takes around 15 to 20 working days to prepare this account statement.

Step 7: Verification of Account Statement by Sub Broker

In this step, the account statement is sent to the sub-broker via email, and you have to verify the statement and give acknowledgment via email.

This means you agree with the stock broker that all these charges are valid and that you do not have any problem with deducting them.

Step 8: File Submission to Exchanges & SEBI

After your email acknowledgment, the stockbroker will create a unique file with your sub-broker code.

The file contains the sub-brokership cancellation document, account statement, email acknowledgment, and back-office documents. The stock broker will submit the document’s to exchanges & SEBI.

Step 9: Verification and Removal of Subbroker Code

After receiving the file, SEBI and exchanges will check it and verify it with the stockbroker.

Once the stock broker confirms, the exchanges and SEBI will remove the sub-broker code from the active sub-brokers list. This verification and removal process will take 10 to 15 working days.

Step 10: Email Confirmation to Sub-broker

After removing the sub broker code, the sub-broker gets a confirmation email from SEBI and the stockbroker about the closure of their sub-brokership.

SEBI will also deactivate sub-broker code during the process.

Step 11: Refund of Security Deposit

After removing the sub broker code, they will receive the security deposit within 7 to 10 working days. The broking house will deduct cancellation and negative balance charges from the deposit.

Related Articles

Best Sub Broker In India Best Stock Broker Partner in India
What is Sub Brokership? How to Become a Sub Broker?
How to Build a Successful Sub Broker Business? Roles & Responsibilities of  a Sub Broker
How to Acquire New Clients in Sub Broker Business? Benefits & Challenges of Sub Broker Franchise
Future of Sub Broker Business Best Mutual Fund Distributor in India

How to Close a Sub Broker Business? – Conclusion

Well, this is how to close a sub-broker business. If you have tried your hand in the sub-broker business but failed to make any impact or income through it, you are free to close the business at any time by following the process we have discussed above.

You can also reach out to the stockbroker yourself to confirm this. Whether you want to close the sub-broker business or change your stockbroker, you can do so with the help of the information curated in this article.