The National Stock Exchange (NSE) has proposed tighter rules for Authorised Persons (APs) who work with stock brokers.
The move aims to improve investor protection, strengthen supervision and make stock brokers more responsible for the actions of their authorised representatives.
The proposed changes have been released in a consultation paper, and market participants can submit their comments until August 27.
Stricter Eligibility Rules for Authorised Persons
Under the proposed framework, people and entities wanting to become Authorised Persons will have to meet stricter eligibility conditions.
These may include minimum educational qualifications, relevant work experience, mandatory NISM certifications and minimum net worth requirements.
The proposed minimum net worth is:
Individual APs: Rs 5 lakh
Partnership firms, LLPs and body corporates: Rs 25 lakh
In addition, every Authorised Person will have to maintain a minimum deposit of Rs 1 lakh with the stock broker.
More Checks on Bank Accounts and Social Media
The proposed rules will also increase compliance requirements for APs.
At the time of onboarding, APs will have to disclose all their bank accounts and demat accounts to the broker.
They will also need to provide details of their business websites and social media accounts.
Stock brokers will be required to screen the social media activity of APs and their promoters, directors or partners. The brokers will also have to keep records of these checks.
New Technology Rules for Trading Terminals
The NSE has also proposed stronger technology-based controls for APs using trading terminals.
These could include geo-tagging of trading terminals, CCTV surveillance and face recognition or biometric authentication before a terminal can be accessed.
The aim is to prevent misuse of trading terminals and make it easier to track where and by whom they are being used.
Stock Brokers to Face Greater Responsibility
One of the biggest changes proposed is increased responsibility for stock brokers.
Under the framework, brokers would be responsible for the acts and omissions of their Authorised Persons and their employees.
Brokers would also have to carry out regular inspections and surprise audits.
They may also need to use offsite alerts to identify warning signs such as unusual trading activity, repeated client complaints and social media-related violations.
APs Cannot Handle Client Money or Securities
The proposed framework also reinforces an important investor protection rule: Authorised Persons cannot receive client funds or securities in their own bank or demat accounts.
Stock brokers would also be required to directly educate clients about the role of APs.
Clients would be warned against anyone making promises of guaranteed or assured returns.
Brokers would also need to maintain client communication records, monitor call recordings and regularly verify the operations of their APs.
Public Comments Invited Until August 27
The NSE has invited market participants and other stakeholders to submit their views on the proposed framework by August 27.
The feedback will be reviewed before the final regulatory changes are introduced.
If implemented, the proposed rules could bring stricter checks, stronger monitoring and greater accountability across the Authorised Person network, giving investors additional safeguards while dealing with stock market intermediaries.
