5 main reasons why a sub-broker is not a broker

People often get confused between the terms broker and sub-broker. However, the two of them are completely different in context. The sub-broker, in particular, is an individual who is not a member of the stock exchange but works as an agent on behalf of a trading member and assists the investor in dealing in securities. It is mandatory for the sub-brokers to obtain a certificate of registration so that they become eligible to exchange stocks. Moreover, the trading members are required to sign an agreement with the sub-broker which lays downs the responsibilities and rights of both these parties.  Click here if you want to know more about trading.

Here are the five main reasons to make you understand the difference between a sub-broker and a broker:

  1. A broker is a registered member of the stock exchange who is allowed to do trading on different shares. On the other hand, although a sub-broker is registered with SEBI, (s), he is not permitted the right to trade. In simpler terms, a sub-broker acts as an agent or assists the trading members in the stock exchange. The brokers can trade on behalf of the clients even in their absence for which they can charge some commission; however, the sub-brokers are not allowed to do so and need to work in coordination with the concerned clients.
  2. When sub-broker wishes to work with a third party, it is mandatory for them to sign an agreement with the concerned person which states the rules and regulations that need to be obeyed in any circumstances. This is not the case with a broker as they are authentically registered with SEBI and the broking and have the rights to do trading on behalf of the clients and assist them on the buying and selling of stocks.
  3. As a sub-broker, one can handle as many clients as possible in the capacity, and there is no restriction on the number of members that you might contact. This can help the individual to generate significant revenue from different sources and work as an entrepreneur in the field of trading and stock exchange. But as a registered broker, you can only connect with the concerned clients who are registered with the broker firm and not beyond that violation of which can make you fall into legal issues.
  4. Sub-brokers are allowed to convert to an authorized person for which they need to submit the required documents for the application process. They would also be required to meet the required criteria that are put down by the brokering firm or SEBI in order to become eligible for the membership. In case, they are willing to withdraw the application they can do so but would be exempted from achieving the status of an authorized candidate. Brokers are already registered with the broking firm, and thus they are considered eligible for all the transactions that take place.
  5. Brokers are required to send newsletters which contain the information about the primary and secondary markets and inform them about the issues that might arise in the long run. They can also assist the clients in portfolio management, asset management, financial planning, tax planning, and much more. The sub-brokers can only work on such terms with clients if they are registered; otherwise, they are not eligible to assist someone on the trading matters. Moreover, such individuals own obligations to the clients as well as the brokers by they are not allowed to make payment through cheques directly as that is only permitted by to the authorized brokers.

March 2020
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