Sebi proposes common advertising code for brokers, mutual funds, may allow celebrity endorsements

Capital markets regulator Sebi has proposed a common advertising code for a wide range of regulated entities, including stock brokers, mutual funds, investment advisers and portfolio managers, in a move aimed at simplifying regulations while strengthening investor protection.

In a consultation paper released on Monday, the regulator proposed replacing multiple advertisement guidelines with a single framework applicable to specified Sebi-regulated entities. Public comments have been invited till July 14.

The proposed framework will cover stock brokers, depository participants, investment advisers, research analysts, portfolio managers, mutual funds and asset management companies, online bond platform providers and any other entities notified by Sebi.


Celebrity endorsements may be allowed
One of the biggest changes proposed is permitting celebrities to endorse the brand or entity of Sebi-regulated firms, subject to prescribed conditions and prior regulatory approval.

However, celebrities will not be allowed to endorse specific financial products or services, as Sebi believes such endorsements could unduly influence investor decisions.

The regulator said allowing brand-level endorsements would help regulated entities improve visibility and promote financial inclusion while maintaining safeguards against misleading promotions.

Prior approval norms may be eased
Sebi has also proposed doing away with the current system of mandatory prior approval for advertisements issued by stock brokers, online bond platform providers, investment advisers and research analysts.

Instead, entities would be required to report advertisements within 24 hours of publication, similar to the post-issuance reporting model already followed by the mutual fund industry.

The regulator said the existing approval process was designed for traditional advertising but has become inefficient in the digital era, where firms publish large volumes of social media posts, videos and promotional content every day.

The consultation paper also proposes allowing regulated entities to use ratings and rankings in advertisements, provided they are assigned by a Past Risk and Return Verification Agency (PaRRVA).

Such advertisements would have to clearly explain the methodology behind the rankings and state that ratings are only one factor investors should consider while choosing financial products or services.

The proposed common code seeks to replace the fragmented regulatory framework currently applicable to different intermediaries, which often requires multiple approvals from different regulators and exchanges for similar advertisements.

According to Sebi, the new framework aims to reduce compliance costs, particularly for smaller entities such as independent investment advisers and research analysts, while ensuring that advertisements remain fair, transparent and not misleading.

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The regulator said the proposals are intended to promote ease of doing business, improve regulatory consistency across intermediaries and strengthen accountability through a technology-enabled post-issuance monitoring mechanism. After considering public feedback, Sebi is expected to finalise the common advertisement code.

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