Sebi proposes ad rules for MF, stock brokers: Celebrities may endorse brands, not products | What's allowed, what's not

Sebi on Tuesday proposed new advertising rules that would allow stock brokers, mutual fund companies, investment advisors and portfolio managers to use celebrities to promote their brand name, but not specific investment products or services.

The proposal is part of a new Common Advertisement Code (CAC) aimed at creating a single set of advertising rules for all Sebi-regulated entities and making compliance easier.

Celebrity endorsements would be permitted only at the regulated entity's brand or corporate level, subject to prescribed conditions and appropriate disclaimers.

Celebrities would not be allowed to endorse specific investment products or services offered by such entities.

At present, such advertisements are allowed only after Securities and Exchange Board of India (Sebi) approval. Sebi has now proposed removing the requirement and noted that instead, these advertisements must be reported to the relevant stock exchange or Sebi-recognised body within 24 hours of being published, after which regulators will monitor them.

"Instead of prior approval, the Board or Sebi-recognised supervisory bodies shall conduct post-issuance monitoring of advertisements reported by the specified regulated entities," the regulator said in its consultation paper.

The watchdog has further proposed permitting specified regulated entities to use ratings or rankings in advertisements, provided such ratings are assigned by a Past Risk and Return Verification Agency (PaRRVA).

However, advertisements using ratings or rankings would be required to disclose the methodology used or provide a direct link to the PaRRVA portal or the regulated entity's website.

Sebi said that content meant only for investor education or awareness, and which does not promote any product or service, will not be treated as an advertisement under the proposed rules.

The regulator has also proposed that companies and online platforms should not use misleading designs or "dark patterns" that trick users into making decisions.

Sebi said that the proposed code seeks to replace multiple entity-specific and exchange-specific advertisement codes with a single, comprehensive framework applicable to stock brokers, depository participants, investment advisers, research analysts, OBPPs, portfolio managers, mutual funds and asset management companies.

The code aims to ensure regulatory consistency across intermediaries by prescribing common standards on disclosures, risk warnings and prohibited claims, while allowing limited carve-outs based on product-specific characteristics.

Sebi said the proposal is intended to facilitate ease of doing business through streamlined compliance requirements, improve accountability through technology-enabled post-issuance monitoring and strengthen investor protection through uniform advertising standards.

The regulator has sought public comments till July 14 on the proposal.

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