The Securities and Exchange Board of India (Sebi) has introduced a Common Advertisement Code (CAC) for regulated market entities, allowing celebrities to promote brands while restricting endorsements of specific financial products and services. The framework aims to standardise advertising practices and ensure that investors receive clear and appropriate information.
The code applies to stock brokers, depository participants, investment advisers, research analysts, online bond platform providers, portfolio managers, and mutual funds and asset management companies.
In its notification dated October 8, Sebi stated, “The celebrities shall be allowed to endorse the regulated entity at the brand level or the entity level. Such endorsements may include the name of products or services offered by a regulated entity but may not include any inducement or claim directly or indirectly regarding any specific product or service”.
Advertisements featuring celebrities will require prior approval from the relevant supervisory body. If no such body has been specified for a regulated entity, approval must be obtained from Sebi.
The regulator has also clarified that expenses related to celebrity endorsements cannot be passed on to clients or charged to mutual fund schemes. Such advertisements must carry the required disclaimers.
Rules for ratings and rankings
Under the new code, regulated entities can use only ratings or rankings assigned by a Past Risk and Return Verification Agency in their advertisements, subject to specified conditions.
These ratings and rankings must be clearly explained in the advertisement or accompanied by details of the agency’s website or the regulated entity’s website, where investors can understand their meaning and methodology.
Advertisements must also clarify that ratings and rankings are only 1 factor to consider when choosing a regulated entity’s services.
To ensure fair comparisons, the ratings or rankings must be based on a study or survey covering all relevant market participants in the category concerned.
Educational content and digital advertisements
Sebi has excluded purely educational content that has no promotional intent from the advertising code.
For digital formats such as SMS messages, pop-ups and push notifications, the regulator has permitted abbreviated disclosures when character limits prevent the inclusion of complete details and disclaimers. However, these communications must provide a hyperlink to the full information available on the regulated entity’s official website.
Sebi stated, “In case an advertisement is in the form of short format messaging such as SMS or Pop-ups, push notifications or any other similar concise electronic communication, and basic details and disclaimers cannot be provided therein due to the character limit associated with the medium, a hyperlink to such details and disclaimers available on the official website of the regulated entity shall be provided”.
The changes have been introduced through amendments to the intermediaries regulations.
Relaxation in call-recording requirements
In a separate notification, Sebi amended rules concerning call recordings between research analysts or research entities and institutional investors.
The revised provisions relax the requirement to maintain recordings of communications with institutional investor clients. The move is intended to improve ease of doing business and reduce record-maintenance compliance requirements for research analysts and research entities.
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