MUMBAI: The markets watchdog Securities and Exchange Board (Sebi) has proposed a common advertisement code across intermediaries along with permitting celebrity endorsements at the entity level but with prior approvals.
The plan, proposed in a consultation paper released Tuesday, seeks to allow celebrity endorsements for regulated entities like asset management companies, stock brokers, investment advisors, and others in its overhaul of advertisement codes. But celebrity endorsements will require prior approval from the regulatory body or exchanges and will only be permitted at the brand or entity level and not for endorsing their products or services.
“While a brand endorsement merely reflects a general association with an entity, endorsement of a particular product or service may unduly influence the decision of an investor by creating perceptions regarding its suitability or expected outcomes,” said Sebi in the consultation paper.
It further said the restriction will strike a balance between legitimate marketing objectives such as visibility and financial inclusion with investor protection.
The regulator is also planning a common advertisement code to facilitate common applicability and standards across its regulated entities in contrast to the current practice of different frameworks for each category of intermediary. The code is proposed to be adopted as a chapter to the Sebi’s intermediaries regulations of 2008.
The proposal follows long-pending demands by the industry players who have at several intervals sought relaxations. “Subjecting each item to prior approval is neither efficient nor effective. Delays associated with obtaining prior approval may also erode the topical relevance of advertisement with time sensitive content and may render them ineffective,” the paper said.
The proposed code specifies the definition of advertisement, celebrities, supervisory bodies along with clarification on mandatory disclosures, and communications different from advertisements.
The code also specifies metrics for considering someone a celebrity. Further, it prohibits use of dark patterns, as specified by the Central Consumer Protection Authority apart from also prohibiting false claims and misleading testimonials, any promise of fixed returns, comparison of products/asset classes, using logos of the regulator or stock exchanges, among others.
The requirement for prior approval for exchanges in case of stock brokers and online bond platform providers and from supervisory bodies in case of investment advisors and research analysts is proposed to be removed.
Sebi is also planning to do away with its post-issuance reporting model where the reporting is done within 24 hours of the issuance of such advertisement.
Sebi noted that the current advertising code requires comprehensive disclaimers in every advertisement—which may not be practical for short format messaging forms or content such as SMS, pop-ups, push notifications. Since unreadable fine print fails the transparency objective it plans to allow using abbreviated disclosures and hyperlink for detailed disclaimers.
