Understanding the difference between an authorised person and a franchise is important for individuals looking to enter the stock broking business or partner with a brokerage firm. In the Indian stock market ecosystem, brokerage firms expand their reach through different partnership models, the most common being the Authorised Person (AP) model and the franchise model.
An authorised person works as an intermediary appointed by a registered stockbroker to assist clients with trading and account-related services. A franchise, on the other hand, typically operates under the brand and infrastructure of a brokerage firm, following its operational framework and business processes.
Both models play an important role in expanding access to financial markets and helping investors connect with brokerage services. However, they differ in terms of regulatory framework, operational independence, compliance responsibilities, and revenue structures.
Authorised persons operate within the regulatory framework defined by the Securities and Exchange Board of India and are registered with stock exchanges through stockbrokers. Franchise models, however, generally function as commercial partnership arrangements within brokerage firms and are governed primarily by internal agreements between the firm and the partner.
In this article, we explore the key differences between an authorised person and a franchise in the stock market, including their roles, business structure, and operational framework.
Table of Contents
What is an Authorised Person?
An Authorised Person (AP) is an individual or entity appointed by a registered stockbroker to act as an intermediary between the broker and clients. The authorised person assists in expanding the broker’s reach by helping investors access trading services and market opportunities.
Authorised persons support brokerage operations by assisting clients with activities such as opening trading accounts, providing general market information, and facilitating the execution of trades through the brokerage platform.
The appointment of an authorised person is carried out by a stockbroker and is registered with the relevant stock exchange in accordance with guidelines issued by the Securities and Exchange Board of India.
Authorised persons operate under the supervision of the stockbroker and must adhere to regulatory guidelines and compliance requirements applicable to brokerage intermediaries.
What is a Franchise in Stock Broking?
A franchise in stock broking is generally a business partnership arrangement in which an individual or entity operates a brokerage outlet under the brand identity and infrastructure of a brokerage firm.
In this model, the franchise partner leverages the brokerage firm’s trading platform, operational systems, and brand recognition to offer trading and investment-related services to clients.
Unlike authorised persons, franchise partners typically operate as independent business entities that collaborate with brokerage firms through contractual agreements defining operational responsibilities, revenue sharing, and business support.
Franchise models focus primarily on business expansion and brand outreach, allowing brokerage firms to establish a presence in different locations and markets.
Authorised Person: Quick Summary
- Appointed by a registered stockbroker
- Registered with stock exchanges through the broker
- Functions as an intermediary between investors and the broker
- Assists with client acquisition and trading-related support
- Operates under the regulatory framework defined by the Securities and Exchange Board of India
- Works under the supervision and compliance structure of the stockbroker
Franchise: Quick Summary
- Operates as a business partnership with a brokerage firm
- Uses the brokerage firm’s brand, infrastructure, and trading systems
- Functions through a contractual agreement with the brokerage company
- Focuses on expanding the firm’s client base and geographic reach
- Revenue structure is typically defined through a partnership model
Authorised Person vs Franchise: Key Differences
| Aspect | Authorised Person | Franchise |
| Regulatory Status | Registered with stock exchanges through a stockbroker under regulatory guidelines | Operates primarily through a commercial agreement with the brokerage firm |
| Role | Acts as an intermediary between investors and the broker | Operates as a business partner offering brokerage services |
| Operational Structure | Works under the supervision and compliance framework of the broker | Operates as an independent outlet under the brokerage brand |
| Compliance Responsibility | Must follow regulatory guidelines applicable to authorised persons | Compliance obligations depend on the partnership agreement |
| Business Model | Focused on client acquisition and trading support | Focused on business expansion and local market presence |
| Brand Identity | Operates under the broker’s license and structure | Operates under the broker’s brand identity |
Conclusion
Both authorised person and franchise models play an important role in expanding the reach of brokerage services within the stock market ecosystem. While they may appear similar at first glance, they differ significantly in terms of regulatory structure, operational responsibilities, and business arrangements.
The authorised person model operates within a defined regulatory framework and functions as an intermediary appointed by a registered stockbroker. In contrast, franchise arrangements typically represent business partnerships that allow brokerage firms to extend their brand presence and services through independent partners.
Understanding these differences can help individuals and businesses evaluate which model aligns better with their goals when exploring opportunities in the stock broking industry.
Disclaimer: This article is intended for informational and educational purposes only. It does not constitute investment, financial, legal, or regulatory advice. The information provided is based on publicly available regulatory frameworks and industry practices at the time of writing. Regulatory guidelines and operational models may change over time. Readers are advised to refer to official circulars issued by the Securities and Exchange Board of India and relevant stock exchanges or consult a qualified professional before making any business or investment-related decisions.
