MediaNama · সাধারণ

Lowdown: SEBI’s final ad code keeps pre-approval for influencer and AI avatar ads. What changed from the draft?

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The Securities and Exchange Board of India (SEBI) has notified a Common Advertisement Code that requires prior approval for ads featuring celebrities, including social media influencers and artificial intelligence (AI)-generated virtual influencers. SEBI’s board memorandum also outlines plans to require firms to report other ads after publication

SEBI kept both requirements despite objections in its public consultation, including from MediaNama, which said in its submission that “neither model is appropriate” and that reviewing ads at digital scale “is not feasible.”

The code covers stock brokers, mutual funds, investment advisers and other market intermediaries. SEBI’s board approved it on September 24, and SEBI published it in the Gazette of India on October 9. It comes into force 180 days after publication, in April 2027. We analysed the draft in June.

Who does the code cover? The code replaces separate advertising rules issued by SEBI and supervisory bodies for seven categories of regulated entities through regulations and circulars. It “will be the common code superseding all existing advertisement codes” for these entities, SEBI said in the memorandum.

Each entity’s supervisory body will approve its celebrity ads and review its other ads:

Stock brokers and online bond platform providers: Stock exchanges
Depository participants: Depositories
Investment advisers: Investment Adviser Administration and Supervisory Body
Research analysts: Research Analyst Administration and Supervisory Body
Mutual funds and asset management companies: Association of Mutual Funds in India (AMFI)
Portfolio managers: Association of Portfolio Managers in India

Until now, stock brokers, online bond platforms, investment advisers and research analysts needed prior approval for ads, while mutual funds needed neither approval nor reporting, according to the memorandum.

The code also applies to mutual fund distributors engaged by asset management companies, and AMFI may set additional standards for them. If an ad mixes SEBI-regulated and other products, the code applies.

What counts as an ad? Any communication, endorsement or representation issued by or on behalf of a regulated entity to promote a product, service, brand or the entity. This covers print, TV, radio, podcasts, websites, social media, streaming services, online news sites, billboards and in-store displays.

The code excludes:

Educational content with “minimal and incidental” branding and no promotional call to action. Content funded from investor education budgets must be reported for post facto monitoring.
Research reports shared with existing clients that make no claims about the firm’s performance
Communication required by regulation, and replies to client requests
Product lists on websites or apps, and basic details about the firm
Product demos that don’t solicit business, greetings, recruitment notices, sponsorships limited to the firm’s name and logo, and client feedback surveys

Any communication that promotes a product or service or solicits interest still counts as an ad.

Who counts as a celebrity?

Anyone ranked among the top 50 in a celebrity index published by a national publication within the preceding year.
Lead actors in mainstream films, TV shows or over-the-top (OTT) web series
Influencers whose follower count on a single platform exceeds the threshold set by the Advertising Standards Council of India (ASCI)
Sportspersons who have played for the national team or represented the country internationally
TV hosts or anchors of at least one season or 10 episodes
Winners or runners-up of popular TV or OTT competitions, or contestants who progressed through their qualifying rounds
Virtual influencers, defined as computer-generated people or avatars with realistic human characteristics
Anyone SEBI or a supervisory body considers “capable of influencing the opinion of viewers”

Founders, promoters, directors and senior management appearing in their own firm’s ads do not count.

What rules apply to celebrity ads?

Celebrities can endorse a firm “at the brand level or the entity level”, but cannot make claims about any specific product or service.
Every celebrity ad needs prior approval from the firm’s supervisory body, or from SEBI if none exists. The supervisory body must decide within four working days, according to the memorandum.
Firms cannot pass the cost of celebrity advertisements on to clients or charge it to mutual fund schemes.

How will SEBI check other ads? Firms no longer need prior approval for ads without celebrities. Instead, they must upload each ad to a supervisory body portal within three working days of issuing it, and the supervisory body must review it within four working days, according to the memorandum. The regulation leaves these reporting rules to a future SEBI circular.

What rules apply to every ad? Every ad must carry the firm’s name, SEBI registration number, logo and SEBI-specified disclaimers. Text messages, push notifications and pop-ups can link to these on the firm’s website. Statistics and charts must carry their source and date.

Ads cannot:

Make false, misleading, exaggerated or ambiguous claims, or claims based on assumptions or projections
Include testimonials
Promise guaranteed, risk-free or indicative returns, or fixed returns, except for online bond platforms
Imply past performance will recur
Use vague terms like “high yield” or “high returns” without basis
Disparage rivals, copy their ads, or compare asset classes in a misleading way
Use SEBI’s or market institutions’ logos without permission

Firms also cannot:

Use dark patterns listed in Annexure I of the Central Consumer Protection Authority’s (CCPA) 2023 guidelines
Offer clients vouchers, coupons, tokens or subscription plans to get them to trade, reactivate accounts, invest or download apps
Cite ratings or rankings from anyone other than a Past Risk and Return Verification Agency
Advertise while suspended

If a third party runs an advertisement on a firm’s behalf without the firm’s consent, the firm must take action, including legal action, within seven days of finding out, inform its supervisory body and disclose the incident on its website. SEBI can act against violations under its intermediaries regulations and direct supervisory bodies to act.

What changed from the draft? SEBI received 412 responses across its five proposals, with 83% in agreement, according to the memorandum.

Longer reporting window: The draft required reporting within 24 hours. SEBI moved it to three working days after 28 respondents objected.
Founders exempted: SEBI accepted that founders and senior management in their own firm’s ads shouldn’t count as celebrities.
Influencer threshold: 17 respondents said the draft’s threshold of five lakh followers was too low and proposed raising it to at least 10 lakh. SEBI instead tied it to ASCI’s threshold, which ASCI can revise.
Approval deadlines: SEBI set four working days for supervisory bodies to approve celebrity ads and review reported ads.
New ban: SEBI barred vague terms like “high returns” used without basis, a change it made after internal discussions.

What did SEBI reject?

Dropping post-issuance reporting: “In order to have regulatory oversight and timely corrective action, it is essential to have post-issue reporting,” SEBI said.
Dropping celebrity prior approval: “As the celebrity endorsement may have wider influence on investors, it is prudent that such advertisements are required to obtain prior approval,” SEBI said.
A clearer education test: 18 respondents called “minimal and incidental” branding subjective. SEBI said the terms “are already self-explanatory.”
Asset class comparisons in educational content: SEBI said such comparisons “can mislead/unfairly favour one product over other.”
Testimonials: “The risk of misleading may be high in testimonials,” SEBI said.
SEBI-CCPA overlap: SEBI said it referred to CCPA’s guidelines so the code would not need amending each time CCPA updates them. It did not address overlapping jurisdiction.

What did MediaNama tell SEBI?

Approval and reporting: MediaNama argued that firms often cannot see where programmatic ads appear, that AI generates personalised ads in real time, and that any review regime is a standing power a future regulator can expand. “The prudent course is not to create power at all,” we said.
Celebrity ads: We said banning testimonials while allowing celebrity endorsements is contradictory, and that a follower threshold lets firms switch to micro-influencers below it. Both concerns remain in the final code.
Education: We said the vague test pushes firms to pre-vet educational content and restrict webinars to closed client groups, and asked that education sit outside any filing. SEBI kept the test and the reporting requirement for education funded from awareness budgets.
Single code: MediaNama supported consolidation, and asked SEBI to list the circulars the code repeals and clarify its overlap with CCPA. The regulation does neither.
Other gaps: We asked SEBI to clarify which dark patterns apply, whether return projections need verification, and who is liable for AI-generated advice. The final code incorporates the dark patterns listed in Annexure I of the CCPA guidelines and prohibits advertisements based on projections. It says nothing on AI-generated advice.

What remains unclear?

Who checks the approver? Stock exchanges will approve celebrity ads for brokers who are their own members.
Founder loophole: A fintech founder with millions of followers can promote their firm without the approval a mid-sized influencer would need.
AI ads: If a broker uses a virtual influencer, the ad may also need labelling under India’s Information Technology Rules on synthetically generated information, placing it under both SEBI and the Ministry of Electronics and Information Technology (MeitY).
Reporting rules: SEBI has not issued the circular on how firms must report ads.
Gaps: The code says nothing on AI-generated investment advice, or on crypto and prediction market ads, which fall outside SEBI-regulated entities.