NSE came up with a circular on 25th March in which the exchange warning brokers about certain practices that were probably not good for the markets and investors in the long run.
1) Incentives/referral schemes:
Some brokers were offering free ETFs for new investors. This was a way to show higher user on the NSE website NSE counts an account if there’s one trade in it and gifting a stock or an ETF is a transaction. Some were even offering cashbacks in various forms.
2) Issue of advertisements: Some members are increasingly using influencers to promote their business, products/services/brokerage plans etc., including undertaking brand promotion. Members are hereby advised to undertake adequate due diligence to ensure that the content used by the influencer strictly adheres to the code of advertisement prescribed by the Exchange.
3) Inactive accounts: Some members are urging clients to execute trades in their account to prevent accounts from being flagged as inactive. Hence, Members should refrain from undertaking any activity including sending oral or written business communications to clients, inducing the clients to execute trades in their account for the sole purpose of keeping the account active.
4) Assured Return Schemes/ Unauthorized Portfolio Management Service: Certain members were engaging in activities/schemes of fixed / periodic payments, which are not permitted under the Byelaws, Rules & Regulations and circulars of SEBI/Exchanges.
Here’s the full Circular