MUMBAI: The Securities and Exchange Board of India (Sebi) has been asking brokers to step up checks on authorized persons (APs) and reinforce compliance every few months, according to three people familiar with the matter.
“Sebi has been informally advising brokers to carry out annual checks and surveillance on authorized persons. They call every 2-3 months to reinforce this,” said one of the three people cited above. “It does not want APs to engage in unauthorized activities such as promising assured returns and collecting funds from retail investors with the intent of fraud.”
India’s vast network of over 100,000 authorized persons (APs)—agents who bring clients to brokers and facilitate trades—has been drawing increasing scrutiny as lapses in oversight and social media-driven investing expose retail investors to rising fraud.
While the AP framework, introduced in 2009, was intended to deepen market participation, it has created blind spots in supervision as brokers scale through agents. Industry executives say supervising the vast network has become increasingly challenging. Official data on their numbers is not publicly available.
"Such scams have always been around but have become more easily identifiable for Sebi. Victims have also started complaining more since the markets have been down in the past two years and they have been forced to bear immense losses,” said Tomu Francis, partner at Khaitan and Co.
APs operate under brokers’ control and cannot independently handle client funds or act outside regulatory limits. Sebi regulations restrict APs from working across the board with all brokers. An AP can be associated with only one trading member for a given segment and cannot be appointed by multiple brokers on the same exchange. They can affiliate with another trading member only for segments where their existing trading member is not registered.
Stock exchanges have also stepped up engagement with brokers alongside Sebi. “NSE (National Stock Exchange) met all brokers a couple of weeks ago and told them again to ensure their APs do not engage in fraud,” the second person mentioned above said.
NSE and Sebi did not respond to Mint’s queries sent on Wednesday.
Sebi's regulatory push comes amid formal investigations against brokers who failed to control their APs.
In November 2025, the regulator fined Angel One ₹300,000, citing unapproved trading terminals and inadequate internal audits after APs registered as employees under another AP were found trading among themselves. Motilal Oswal faced a similar ₹300,000 penalty in June 2025 for oversight lapses, including use of unqualified personnel and misuse of client credentials.
"APs sometimes go beyond their role as they want to earn more money. They start promising assured returns to clients they have a long standing relationship with,” said Abhiraj Arora, partner at Saraf and Partners.
Francis of Khaitan and Co. said that APs exploiting their relationship with clients often target people who are less financially literate. Such arrangements are not documented, and the investor continues to believe they are trading with the broker.
Brokers conduct surprise inspections and maintain checklists for compliance, but “surveillance is difficult as AP can still engage in misconduct without the broker knowing,” Arora said.
Investor risks have escalated with social media-driven trading. A 2025 survey by Sebi found that 62% of retail investors rely on finfluencers for investment decisions, with a significant proportion acting directly on such advice. Many of these influencers operate in close proximity to authorised person networks, either formally or informally, blurring the lines between advice, execution and fund handling.
Sebi has removed over 100,000 pieces of content for violations and uses artificial intelligence (AI) tools to track unregistered investment advice.
“Finfluencers who take trading courses also become APs or associate themselves with other APs and brokers to collect money from investors. As such instances rise, there have been more visible grievances in the last two years due to the market downturn,” Francis said.
One high-profile case involved influencer Avadhut Sathe. In December 2025, Sebi alleged that Sathe, through his trading academy, gave stock tips and engaged in unregistered investment advisory via online classes and webinars. The regulator disgorged over ₹500 crore for the violations.
“Victims of scams very rarely file a criminal complaint or reach out to Sebi as such investigations take time and by the time they are solved, only a portion of the money would be recovered. In such cases, investor awareness is key as investors need to be aware of the regulations that protect them,” Francis added.
Apoorva is a Mumbai-based journalist at Mint who covers the Securities and Exchange Board of India (SEBI), tracking the pulse of India’s capital markets, regulatory developments and the people who operate within them. She holds a postgraduate diploma in business and financial journalism from the Asian College of Journalism, where she developed a strong foundation in markets, companies, and economic policy. She began her journalism journey with an internship at Bloomberg, where she worked across beats such as real estate, infrastructure, capital markets, and deals, which helped her understanding of business and finance.<br><br>She is guided by the belief that everything in this world can be explained in simple and fewer words, and that idea shapes how she approaches her writing. She aims to cut through complexity and present nuanced regulatory and financial developments in a way that is both accessible and meaningful to readers.<br><br>When she is not tracking market chatter, Apoorva can usually be found deep into a fiction novel or out on a long run. She is also a trained classical dancer in Bharatanatyam, Mohiniyattam, and Kathakali.