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How to become a Stock Broker in India and register with SEBI / NSE/ BSE?

Regulatory Background:

SEBI Stock-Brokers And Sub-Brokers Regulations, 1992 is the primary regulatory framework for Stock Brokers. This is seconded by Bye-laws, Rules, Regulations and Circulars of respective Exchanges like NSE, BSE, MCX, NCDEX.

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To become a stock broker one needs to become a member of one or more Exchanges by registering with them.

Entity Type:

A stock broker can be:

  • An Individual

  • A Partnership Firm

  • A Limited Liability Company (LLP)

  • A Company

Categories of Membership of Exchanges:

  1. Trading Members (TM) - As a TM, you can execute transactions in your own account or the account of your clients, but the clearing and settlement of your trades will happen through a Clearing Member

  2. Trading cum Self Clearing Member (TSC) - As a TSC, you can execute trades for yourself and your clients as well as clear and settle them yourself. You need not appoint a clearing member.

  3. Trading cum Clearing Member (TCM) - As a TCM, you can execute, clear and settle trades for yourself, your clients as well as clear and settle trades for other Trading Members.

  4. Professional Clearing Member (PCM) - As a PCM, you can only clear and settle trades for other Trading Members or clients. You cannot offer trading services.

Segments of Membership:

  1. Capital Market - Existing securities can be bought and sold among investors and traders on the Capital Market segment.

  2. Equity Derivatives - Derivative, both Futures and Options contracts, of securities and indices can be transacted on Equity Derivatives segment.

  3. Currency Derivatives - Futures contracts for US Dollars (USD), Euro (EUR), Great Britain Pound (GBP), and Japanese Yen (JPY) are traded on Currency Derivative Segment.

  4. Interest Rate Derivatives - Derivative contracts on interest rates can be traded on Interest Rate Derivatives segment.

  5. Commodity Derivatives - Derivative, both Futures and Options Contracts of commodities can be traded on the Commodity Derivatives Segment.

Types of Membership:

  1. Normal - A normal membership allows unrestricted business expansion by adding any number of clients. Most stock brokers avail a Normal Membership 

  2. Alpha - An alpha membership allows transactions in proprietary (own) account of a member and up to 50 clients which are closely related to the member. This membership is suitable for members intending to carry our proprietary trading and trading for a few entities related to the member like its directors, their relatives etc.

Steps for Registration:

Membership Process.png

Investment Limit:

  • Each investor in AIF has to invest a minimum amount of Rs. 1 Crore.

  • Employees / Directors of AIFs or of manager can invest a minimum amount of Rs. 25 Lakhs.

Important Points:

  • An AIF may launch schemes after filing Private Placement Memorandum (PPM) with SEBI.

  • PPM is a document that contains all the necessary information about the scheme of AIF for a prospective investor so that the investor can take an informed decision.

  • Sponsor is required to have a continuing interest in AIF (Category I & II - 2.5% of corpus or Rs. 5 Crores, whichever is less. Category III - 5% of the corpus or Rs. 10 Crores, whichever is less).

  • Category I & II AIFs can be only close ended, whereas Category III can be open ended or close ended.

  • Category I & II AIF shall have minimum tenure of 3 years (maximum 5 years for Angel Fund)

  • Angel Fund is a sub-category of Venture Capital Fund under Category I AIF that raises funds from angel investors. Angle fund have certain relaxation in AIF regulatory requirement which include reduce corpus, commitment from investor etc. and have to follow the prescribe guidelines while investing.

  • 100% FDI is permitted under Automatic route in all the Categories of AIFs.

  • AIF can invest overseas subject to following required compliance of SEBI and RBI.

  • All AIFs shall have Qualified Institutional Buyer (‘QIB’) status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

How can SecMark assist you?

  • Advising on optimum structure amongst Company, Trust or LLP with efficient tax impact for AIF.

  • Advising on matters related to entity to be used for SEBI registration, Investment Management, Sponsorship, Investment team etc.

  • Assistance in applying to SEBI for registration.

  • Assistance in preparation of fund documents viz. Private Placement Memorandum, Contribution Agreement, Investment Management Agreement etc.

  • Advising on qualification and experience required for getting the licenses.

  • Online and Physical application to SEBI which would include filling of Form A.

  • Responding to queries of SEBI, Getting Certificate of Registration.

  • Coordination with various professional agency viz. Trustee, Registrar, Custodian.

  • Assistance in setting up operations.

  • Designing policies, procedures and operation processes.

  • Assistance in co-ordination with Benchmarking Agencies and Auditors.

  • Outsourcing of non-critical functions like accounting, regulatory filings etc.

For more information, you can reach out to us by filling the contact us form and we will be happy to assist you

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