Description

BSE clarifies that stock brokers can reference banking products offered by banks/NBFCs through referral arrangements, while remaining prohibited from distributing lending products as distributors.

Summary

BSE has issued a clarification regarding the distribution of third-party products by trading members. Following previous notices from June 16, 2025 and December 22, 2025, the exchange clarifies that stock brokers are permitted to reference banking products offered by banks and Non-Banking Financial Companies (NBFCs) on their apps/platforms through referral arrangements. However, stock brokers remain prohibited from engaging as distributors in any lending products (such as Home Loan, Vehicle Loan, Personal Loan, Education Loan, LAS etc.) except those specifically permitted by SEBI.

Key Points

  • Stock brokers cannot engage as distributors in lending products (Home Loan, Vehicle Loan, Personal Loan, Education Loan, LAS, etc.) unless specifically permitted by SEBI
  • Referral arrangements for banking products offered by banks/NBFCs are permitted on stock broker apps/platforms
  • Such referral arrangements must comply with SEBI’s third-party product guidelines
  • This circular clarifies previous notices dated June 16, 2025 and December 22, 2025

Regulatory Changes

This circular does not introduce new regulatory changes but provides important clarification on existing regulations. It distinguishes between:

  1. Prohibited Activity: Stock brokers acting as distributors of lending products
  2. Permitted Activity: Stock brokers making references to banking products through referral arrangements

The key distinction is the nature of engagement - referral arrangements are acceptable, while direct distribution roles are not permitted.

Compliance Requirements

  • Trading members must ensure they do not engage as distributors in any lending products unless specifically permitted by SEBI
  • Any references to banking products on stock broker platforms must be structured as referral arrangements
  • All referral arrangements must comply with SEBI’s third-party product distribution guidelines
  • Members must take note of the circular contents and ensure compliance

Important Dates

  • Notice Date: December 24, 2025
  • Notice Number: 20251224-52
  • Reference Notices:
    • June 16, 2025 (Notice No. 20250616-26)
    • December 22, 2025 (Notice No. 20251222-13)

Impact Assessment

Impact on Stock Brokers: Medium impact - Stock brokers need to review their third-party product offerings and ensure that any lending product references are structured as compliant referral arrangements rather than distribution relationships. This clarification provides operational flexibility while maintaining regulatory boundaries.

Market Impact: Low to medium - This clarification enables stock brokers to maintain partnerships with banks and NBFCs through referral models, potentially supporting business diversification while protecting investor interests through clear regulatory guidelines.

Compliance Impact: Stock brokers must audit their current third-party product arrangements to ensure compliance with the distinction between prohibited distribution activities and permitted referral arrangements.

Impact Justification

Clarifies regulatory compliance requirements for stock brokers regarding third-party product distribution, specifically allowing referral arrangements for banking products while maintaining prohibition on direct lending product distribution