KD NEWS SERVICE
MUMBAI, Aug 7: In a landmark initiative aimed at reinforcing investor protection, strengthening market integrity and modernising India’s securities market ecosystem, the National Stock Exchange (NSE), in consultation with the Securities and Exchange Board of India (SEBI) and other stock exchanges, has released a comprehensive consultation paper proposing a far-reaching overhaul of the regulatory framework governing Authorised Persons (APs). The proposed reforms, which seek to replace the existing framework introduced in 2009, are expected to significantly tighten oversight, enhance accountability and introduce technology-driven safeguards across the brokerage ecosystem.
The exchange has invited comments and suggestions from all stakeholders on the proposed framework, with feedback to be submitted by August 27, 2026. The consultation marks one of the most significant regulatory reviews of Authorised Persons in recent years and reflects regulators’ intent to keep pace with the rapidly evolving capital market landscape, growing retail investor participation and emerging technological challenges.
According to the consultation paper, the proposed framework seeks to establish higher standards of governance by introducing stricter eligibility criteria for individuals and entities seeking registration as Authorised Persons. Under the revised norms, individuals must be Indian citizens aged at least 21 years, satisfy SEBI’s “fit and proper” criteria, possess a minimum educational qualification of Class XII along with two years’ experience in the securities market, and obtain mandatory certifications from the National Institute of Securities Markets (NISM). These certifications would cover securities operations, business-specific qualifications and anti-money laundering compliance, while remaining valid throughout the registration period.
For partnership firms, limited liability partnerships and corporate entities, the proposals prescribe additional governance requirements, including the appointment of designated directors or partners meeting prescribed eligibility standards. The consultation paper also recommends minimum net-worth requirements of ₹5 lakh for individual APs and ₹25 lakh for non-individual entities, along with a mandatory security deposit of at least ₹1 lakh to be maintained with the stock broker. Brokers may require higher deposits depending on business volume, client exposure and operational risks.
A major focus of the proposed reforms is preventing conflicts of interest and strengthening professional accountability. The framework prohibits an Authorised Person from working simultaneously with multiple brokers in the same segment on the same exchange or functioning as a client of another broker in that segment. It also seeks to prevent indirect registrations through family members or associated entities, thereby closing loopholes that could potentially undermine regulatory oversight.
Recognising the growing influence of digital platforms in investor engagement, the consultation paper introduces stringent disclosure norms relating to websites and social media. Authorised Persons would be required to disclose professional websites and social media handles used for client acquisition or market-related communication, while brokers would be expected to conduct digital background verification and maintain records of such scrutiny. Annual disclosure of bank accounts, demat accounts, social media details and net-worth certificates has also been proposed to facilitate continuous supervision.
The proposed regulations make it explicitly clear that Authorised Persons cannot receive client funds or securities in their own accounts, charge clients directly for their services or obtain authority to trade on behalf of investors. They are also barred from engaging in illegal activities such as unauthorised or “dabba” trading and would be required to comply fully with anti-money laundering and investor protection regulations.
One of the most notable aspects of the consultation paper is its emphasis on leveraging technology to strengthen market surveillance. Where trading terminals are allocated to Authorised Persons, brokers would be required to implement geo-tagging, facial recognition or biometric authentication, CCTV surveillance and tamper-proof recording of client order placements. Every terminal operated by an AP would effectively be treated as a branch office of the stock broker, making the broker directly responsible for activities carried out through such locations.
Client data protection also receives considerable attention under the proposed framework. APs would be required to ensure strict confidentiality of investor information and comply with all applicable data security and privacy requirements, while brokers would be responsible for continuously monitoring compliance and safeguarding sensitive client data.
The consultation paper substantially enhances the responsibilities of stock brokers by making them accountable for every act of omission or commission committed by their Authorised Persons. Brokers would be required to conduct regular inspections, surprise audits, mystery audits and off-site surveillance while monitoring social media activities, client complaints, trading behaviour and operational risks. Monthly alert-generation systems based on predefined risk parameters would also become mandatory to detect unusual trading patterns, inactive terminals, suspicious client activity and other potential compliance concerns.
In addition, brokers would have to organise annual compliance training programmes for Authorised Persons, provide comprehensive welcome kits outlining regulatory responsibilities, issue periodic compliance advisories and educate investors regarding the role and limitations of APs. New clients introduced through APs would also receive recorded verification calls from brokers to confirm onboarding details, explain the AP’s role and caution investors against fraudulent promises of guaranteed returns.
To improve transparency, stock brokers would also be required to publish on their websites the complete list of Authorised Persons, including deregistered entities and complaint statistics. In cases involving disciplinary action or deregistration, brokers would be expected to ensure uninterrupted services to investors, promptly inform affected clients and take immediate measures to safeguard investor interests.
The consultation paper also lays down detailed procedures for withdrawal of registration. While Authorised Persons may voluntarily discontinue their association with brokers through mutual agreement, stock exchanges would retain powers to cancel registrations where continuation is considered detrimental to investors or the securities market. Those whose registrations are cancelled on disciplinary grounds would be barred from obtaining approval on any stock exchange in the future, with exchanges required to publicly disclose such actions in the interest of transparency.
By inviting extensive stakeholder participation before finalising the revised framework, NSE has underlined its commitment to consultative policymaking and robust market regulation. The proposed reforms are widely expected to strengthen governance standards, enhance investor confidence, improve supervision of intermediaries and create a more transparent, technology-driven and resilient securities market capable of supporting India’s rapidly expanding investment landscape.
