Description

BSE clarifies that stockbrokers registered as research analysts must comply with distribution guidelines and are not permitted to engage in lending products except those specifically permitted by SEBI.

Summary

BSE has issued a clarification regarding the distribution of third-party products by trading members, specifically addressing stockbrokers who are also registered as research analysts. The exchange reiterates that such stockbrokers must comply with the guidelines outlined in Exchange Notice No. 20250616-26 dated June 16, 2025, and are not permitted to engage in distribution of lending products (Home Loan, Vehicle Loan, Personal Loan, Education Loan, LAS, etc.) other than those specifically permitted by SEBI (such as MTF and T+1+5 funding).

Key Points

  • Stockbrokers registered as research analysts must comply with BSE’s third-party product distribution guidelines
  • Trading members observed distributing banking products related to various types of loans
  • SEBI’s FAQ clarification (Circular Ref. No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/105 dated July 23, 2025) allows research analysts/entities to distribute banking products at family/group level, but this does not apply to stockbrokers
  • Stockbrokers are prohibited from engaging as distributors in lending products except those specifically permitted by SEBI
  • Permitted lending products: MTF (Margin Trading Facility) and T+1+5 funding
  • Prohibited lending products: Home Loan, Vehicle Loan, Personal Loan, Education Loan, LAS (Loan Against Shares), etc.

Regulatory Changes

This circular provides a clarification rather than introducing new regulations. It reaffirms the application of existing guidelines from Exchange Notice No. 20250616-26 dated June 16, 2025, and clarifies that the SEBI FAQ exemption for research analysts distributing banking products does not extend to stockbrokers who are also registered as research analysts.

Compliance Requirements

  • Trading members must cease distribution of unauthorized lending products (Home Loan, Vehicle Loan, Personal Loan, Education Loan, LAS, etc.)
  • Stockbrokers who are also registered as research analysts must strictly adhere to the restrictions outlined in Exchange Notice No. 20250616-26
  • Members must limit lending product distribution to only SEBI-permitted products such as MTF and T+1+5 funding
  • Ensure strict compliance with the framework for distribution/offering of third-party products

Important Dates

  • Notice Date: December 22, 2025
  • Notice Number: 20251222-13
  • Reference Circular Date: June 16, 2025 (Exchange Notice No. 20250616-26)
  • SEBI FAQ Date: July 23, 2025 (Circular Ref. No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/105)

Impact Assessment

Market Impact: This clarification has significant operational implications for trading members who have been engaging in distribution of banking and lending products. Stockbrokers who are also registered as research analysts will need to reassess their product distribution activities and discontinue unauthorized lending product offerings.

Business Impact: Trading members may face revenue impact if they have been earning commission/fees from distributing prohibited lending products. They will need to restructure their third-party product distribution business to ensure compliance.

Compliance Impact: High compliance priority as the exchange explicitly requires strict adherence to the guidelines. Non-compliance could lead to regulatory action by BSE and potential penalties.

Affected Parties: Trading members, stockbrokers registered as research analysts, and clients who may have been offered prohibited lending products through their brokers.

Impact Justification

High importance as it clarifies restrictions on stockbrokers distributing banking/lending products, affecting business operations of trading members who are also research analysts