On October 24, 2024, the Securities and Exchange Board of India (SEBI) issued a circular (No. SEBI/HO/MIRSD/MIRSD-POD1/P/CIR/2024/146) clarifying the applicability of the advertisement code for Research Analysts (RAs). This clarification comes in light of queries regarding whether research reports by RAs qualify as advertisements.
Background
Previously, SEBI addressed the advertisement code for RAs in Circular No. SEBI/HO/MIRSD/MIRSD-PoD-2/P/CIR/2023/51 dated April 5, 2023, and the Master Circular for Research Analysts issued on May 21, 2024. These documents outlined the requirements that RAs must follow when advertising their services.
Key Clarifications
The latest circular emphasizes that research reports and recommendations from RAs are not classified as advertisements unless they promote specific products or services offered by the RA. The Master Circular states that communication forms subject to the advertisement code include various promotional materials such as pamphlets, brochures, and digital communications (e.g., emails, social media posts).
However, if a research report contains any information that implicitly or explicitly promotes RA services or products, it may then be considered an advertisement. The revised paragraph 8.1 a. ii of the Master Circular is designed to ensure that investors can differentiate between informative research and promotional content.
Regulatory Authority
This clarification is issued under the authority of Section 11(1) of the Securities and Exchange Board of India Act, 1992, and Regulation 24(2) of the SEBI (Research Analysts) Regulations, 2014. SEBI aims to protect investor interests while promoting the development and regulation of the securities markets.
This initiative by SEBI reinforces the importance of transparency and accuracy in financial communications, ensuring that investors receive unbiased research insights while also distinguishing between educational content and promotional material.
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