In recent regulatory developments, the Securities and Exchange Board of India (SEBI) has issued comprehensive guidelines aimed at enhancing the transparency and reliability of advertisements issued by Investment Advisers (IAs) and Research Analysts (RAs). These guidelines, outlined in Circular No. SEBI/HO/MIRSD/MIRSD-PoD-2/P/CIR/2023/51 dated 5-4-2023, have since been superseded by the Master Circular No. SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/50 dated 21-5-2024, specifically pertaining to IAs.
Scope and Forms of Communication
The regulations mandate that any communication, including pamphlets, circulars, brochures, research reports, or electronic and audio-visual media issued by or on behalf of IAs/RAs that may influence investment decisions, must adhere to the advertisement code.
Key Information and Disclosures
Advertisements must prominently feature:
· Registered name, SEBI registration number, and contact details of the IA/RA.
· Accurate, truthful, and complete information in clear and concise language.
· A standard warning about market risks in legible fonts, with specific requirements for audio-visual media to ensure clarity and comprehensibility.
· Translation of warnings in non-English advertisements.
· Hyperlinks to detailed information when using SMS/Message/Pop-up or social media platforms.
Prohibited Content in Advertisements
The guidelines strictly prohibit:
· False, misleading, biased, or deceptive statements.
· Use of misleading testimonials or exaggerated claims.
· Assured or guaranteed returns, minimizing market risks, or misleading comparisons.
· Reference to past performance without proper context.
· Use of SEBI’s logo or superlative terms suggesting endorsement or superiority.
Compliance Requirements
Additional requirements include:
· Prior approval of advertisements from SEBI recognized supervisory bodies.
· Compliance with suspension directives issued by SEBI or its recognized bodies.
· Prohibition from engaging in promotional schemes or competitions.
Implementation and Enforcement
Effective from May 1, 2023, these regulations are enforced under the authority of SEBI to safeguard investor interests and ensure market integrity. Advertisers must retain copies of advertisements for five years and comply with any supplementary guidelines issued by SEBI or recognized supervisory bodies.
Conclusion
SEBI’s stringent guidelines on advertisement codes for IAs and RAs underscore the importance of transparency and accuracy in financial communications. These regulations ensure that all communications are accurate, clear, and devoid of misleading content, thereby fostering a trustworthy environment in the financial advisory and research sectors. By adhering to these guidelines, stakeholders can uphold regulatory standards, protect investor interests, and contribute to a more informed and trustworthy securities market.
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