Stockbroker in India – Eligibility, Documents Required & Process

Stock investing and trading have become lucrative career options in India. Especially in the post covid period, India has seen a tremendous increase in the number of investors or and traders that have taken a plunge in the stock markets. While there are multiple investors and traders in the country, the number of stockbroker and sub brokers are relatively low. This creates a good career and business opportunity to become a stockbroker and a sub broker in India.

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Given below is the meaning of being a stockbroker and the process to become one.   

Who is a stockbroker?

A stockbroker can be a person or an entity that has the authority to purchase and sell securities on the recognized stock exchanges on behalf of the investors and traders. For this, the person or the entity has to first become a member of the recognized stock exchange after following the due process and paying the requisite fees. A person can also become a sub broker by working in a brokerage firm and acting on behalf of the trading member as their agent or otherwise. 

What are the eligibility requirements to become a stockbroker?

To become a stockbroker or a sub broker and a member of a recognized stock exchange, a person (or entity) has to meet all the eligibility criteria set by SEBI. The key eligibility requirements to become a stockbroker or a sub broker are highlighted below. 

1. The applicant can be a person or any other organization (registered partnership firms, limited liability partnerships, corporations, companies, or institutions)
2. The person has to be an Indian citizen of a minimum of 21 years of age. There is no limit on the maximum eligible age for being a stockbroker.
3. The minimum educational qualification to be a stockbroker is having an HSC or its equivalent.
4. Basic certification in either Securities Market (Basic) Module or Compliance Officers (Brokers) Module or relevant modules as per the required segment for membership of the Exchange.
   1. Capital Market (Dealers) Module
   2. Derivatives Market (Dealers) Module
   3. National Institute of Securities Markets (NISM) Series
   4. Derivatives Certification Examination
5. The basic skills required by the applicants are,
   1. Analytical skills
   2. Communication and presentation skills
   3. Financial knowledge and good knowledge of computers
   4. Understanding of the stock markets and their movements
   5. Minimum experience of 2 years working as a partner, authorized assistant, or authorized clerk or apprentice to the member. 
   6. The Base Minimum Capital Deposit (BMC) required to be a stockbroker is tabled below.

What are the documents needed to become a stockbroker in India?

Along with the above-mentioned eligibility criteria, the applicants also have to submit the prescribed set of documents along with the application form. The required documents include

1. A duly filled application form
2. Basic details like the name and address of the applicant along with contact details, name of the trading firm, name of the stock exchange
3. Documents asserting the type of organization like partnership deed, memorandum, and articles of association (in case of a non-individual)
4. PAN of the applicant
5. Educational qualifications of the applicant
6. Certificate of registration or incorporation 
7. Certificate of passing the required module
8. MOU/ copy of the Contract Agreement entered with the clearing member in case where the applicant wants to clear and settle trades through such clearing member
9. Recommendation from stock exchange

Who cannot be a stockbroker in India?

The rules and regulations of SEBI expressly mention the persons or conditions where such persons or entities cannot become a stockbroker with any recognized stock exchanges. Given below are the details of the same. 

1. A person or an entity that has been adjudged bankrupt or insolvent.
2. A person or an entity that has been convicted of any offense related to fraud or dishonesty.
3. A person or an entity who has compounded with their creditors for less than the full discharge of debts.
4. A person or an entity engaged as a principal or employee of any business other than securities except a broker or agent not involving any personal financial liability or for providing merchant banking, underwriting, or corporate or investment advisory services unless such ties are severed before admission as a member. 
5. A person or an entity declared a defaulter or expelled by a recognized stock exchange or debarred from trading in Securities by SEBI or RBI or similar authorities or has been disqualified as per the provisions of Securities Contract (Regulations) Act, 1956 or Rules made thereunder. 
6. If the membership application is rejected or disqualified by the registered stock exchange on grounds of it endangering public interest.

What is the application process to become a stockbroker?

The application process to become a stockbroker involves many steps and is quite complex. The detailed application procedure to become a stockbroker is mentioned below.

1. The first step is to download the application form from the website of SEBI or by visiting its nearest office
2. The next step is to submit the application form ‘Form A’ for Registration as Stockbrokers with SEBI along with all the required documents.
3. If all the information provided is in order, the applicant will get an acknowledgment of their submitted application 
4. The application form and the supporting documents will be examined for Board approval and SEBI certification following which the applicant will be issued an offer letter of temporary membership.
5. The next step is the receive SEBI certification after further processing.
6. Further, the applicant will have to submit the enablement documents to the membership department.
7. The membership department will then provide access to the members on their trading system. 

Conclusion

Being a stockbroker or a sub broker is a lucrative yet complex business that requires a lot of skills and utmost understanding of the markets. The process to become a stockbroker is also quite complex where the applicant has to first meet all eligibility requirements and ensure that they have complied with all the basic requirements to become a stockbroker.  

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