Investing in the stock or equity market continues to be an exciting option for individuals in India. Over the past decade, the scope of investments have grown exponentially and more and more people are considering investing in the stocks to be a viable option for financial sustainability.
An important part of the investment process are the stockbrokers or share market brokers, without whom it will be extremely difficult for the individual investors to fulfil their trades. Franchise and authorised persons are two types of agents whom the traders can find in the closed ecosystem of the Indian stock market.
Even though this article is focused on the franchise model, it is essential to understand who the authorised persons are, before we delve into that topic.
According to the definitions of SEBI (Securities and Exchange Board of India), authorised person or AP refers to any person - individual, partnership firm, LLP or body corporate - who is appointed by a stockbroker as an agent for the broker. The authorised persons help in establishing a connection between the trader and the stock exchange. The responsibilities of authorised persons include purchasing, selling and dealing with securities, and assisting both the stockbrokers and the investors.
Authorised persons help the investors in various ways, which is not only limited to dealing with securities but also includes guiding the investors towards good and profitable investments by giving them advice and by offering after-sales services.
As mentioned earlier, these authorised persons act as agents of the stockbrokers. This means they are not directly registered with the stock exchange and they must work under different stockbrokers and help expand their business network.
Now that we have an understanding regarding the definition and functions of authorised persons, we can move forward to the next discussion regarding the franchise model.When a stockbroker house has grown into a large institution, it may allow the authorised persons to remain active under the brand name and license of the booking house. This is decided on strict and fixed commercial terms. This is termed as the franchise model and the booking house which sells its franchise are called the franchisorAnyone can apply for a franchise with a large scale booking house, which includes individuals as well as small and medium scale businesses.
The services offered by the franchise of a large scale broking house is usually the same as the services offered by the main company itself. These include fulfilling trading activities, providing the clients with strong financial advice, providing information regarding securities and so on.
So keeping in mind the basic information regarding franchise and authorised persons, let us look into the main differences between the two.
Because trading in the stock market comes with high levels of market risk, it is important for traders or investors to know their broker before they jump into the flow and invest their money. The qualities and experience of the agent or the franchise is extremely useful in case an investor is looking for advice regarding good and profitable options for investments.
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