A recent NSE The circular has banned sharing of brokerage revenues through referrals to prevent trade inducement.
“To comply with this norm, we have stopped sharing brokerage revenue on referrals from August 25, 2024. We will continue to give 300 reward points for every referral,” Zerodha said.
Zerodha said it would pay out all referral wallet balances above Rs 10 and stop the referral program from August 25.
However, clients will continue to receive 300 reward points once for each account they refer, which they can redeem for AMC or paid access to other associated products (smallcase, Tickertape, Tijori, MProfit and Quicko). Meanwhile, the broker said that it is representing the exchanges directly and through various forums on why it should continue with the referral program. Earlier, NSE said that it had come to the exchange’s notice that certain referring persons are not registered as authorized persons of the respective trading member. In order to safeguard the interest of investors, the exchange clarified that any person who refers a client to the trading member will be designated as an authorized person (AP) of the trading member after obtaining specific prior approval from the stock exchange.
“It is reiterated that trading members should ensure that their authorised persons engage only in permitted activities and do not carry out any business which is not permitted under Sebi regulations including operation of any unauthorised collective investment scheme etc,” a circular from the exchange said.
The exchange’s reasoning is that a broker sharing a percentage of the brokerage generated as referral profit for clients could lead to individuals inducing their referrals to trade, which is not in the best interest of the client.
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