Zerodha stops sharing brokerage revenue for referrals after NSE circular

Zerodha stops sharing brokerage revenue for referrals after NSE circular

In a big blow to finfluencers, Zerodha had on August 20 announced that it will stop sharing brokerage income for referrals after a recent National Stock Exchange (NSE) circular.

NSE, through its recent directive, prevented such a move to prevent trade inducement. Zerodha informed its users disallowing sharing the revenue for referrals effective August 25, 2024.

The company, however, will continue to award 300 reward points for each referral.

The leading broker in its bulletin on August 20 said "a recent NSE circular disallows sharing brokerage income for referrals to prevent trade inducement".

NSE had said in its circular, "It is reiterated that Trading Member shall ensure their Authorised Persons are engaged only in permitted activities and are not undertaking any business, which are disallowed under the Byelaws, Rules, Regulations and Circulars of SEBI/Exchange including operating any schemes of unauthorized collective investments/portfolio management, promising indicative/ guaranteed/fixed returns etc."

"With a view to safeguard the interest of investors, it is hereby clarified that any person referring a client to the Trading Member shall be appointed as an Authorised Person (AP) of the Trading Member after obtaining specific prior approval from the stock exchange for each such person," it added.

"We will pay out all referral wallet balances >Rs10 and stop our referral program from Aug 25th 2024. However, you will continue to receive 300 reward points one time for every account you refer that you can redeem against AMC or paid access to other partner products (smallcase, Tickertape, Tijori, MProfit & Quicko)," Zerodha said in a statement.

Zerodha Founder Nithin Kamath too to X saying "NSE issued a circular last week stopping brokers from sharing any brokerage as a referral incentive unless that person is registered as an authorized person with the exchanges. This is another one of those circulars that will hurt the business."

NSE issued a circular last week stopping brokers from sharing any brokerage as a referral incentive unless that person is registered as an authorized person with the exchanges. This is another one of those circulars that will hurt the business.

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So, we are stopping our… pic.twitter.com/cQgAAl5tGH

— Nithin Kamath (@Nithin0dha) August 21, 2024

The exchange’s reasoning is that a broker sharing a percentage of the brokerage generated as a referral benefit to clients could lead to individuals inducing their referrals to trade.