Market regulator Sebi has notified a common advertisement code for market intermediaries, allowing them to engage celebrities for brand or entity-level promotion and prohibiting endorsements of specific financial products or services.
The Common Advertisement Code (CAC) will apply to regulated entities -- stock brokers, depository participants, investment advisers, research analysts, online bond platform providers, portfolio managers, and mutual funds/asset management companies.
In a notification dated October 8, Sebi said, "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".
It further said that any advertisement featuring a celebrity would require prior approval from the supervisory body or the Sebi if no such body has been specified for the regulated entity.
Sebi said that expenses incurred towards celebrity endorsements would not be passed on to the clients or charged to the mutual fund scheme. Such advertisements would include the relevant disclaimers as specified. The regulated entity would be permitted to use only the ratings or rankings assigned by a Past Risk and Return Verification Agency in the advertisement, subject to certain conditions.
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Among the conditions, the ratings or rankings must be properly explained either in the advertisement itself or by including details of the Past Risk and Return Verification Agency website or the regulated entity's website where an investor can obtain further information about the meaning and methodology of such ratings or rankings.
The advertisement should also state that ratings or rankings are only one factor to consider when deciding whether to use the services of a specific regulated entity. Such ratings or rankings must come from a study or survey by a Past Risk and Return Verification Agency that covers all relevant market participants within the concerned category to ensure comparability and objectivity.
The regulator has also clarified that purely educational content without promotional intent has been excluded from the advertisement code.
To address digital formats, Sebi has allowed abbreviated disclosures in SMSes, push notifications and pop-ups, provided they include hyperlinks to full risk disclosures.
"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," Sebi said.
To this effect, Sebi has amended the intermediaries regulation.
In a separate notification, the market watchdog has amended rules, relaxing the requirement of maintaining call recordings of communications with clients who are institutional investors for research analysts and research entities.
The move is expected to facilitate ease of doing business and reduce compliance obligations towards maintenance of records for research analysts and research entities.