The Securities and Exchange Board of India (SEBI) on October 14, 2024, provided clarity regarding the classification of research reports and recommendations made by research analysts (RAs). In a circular, it said that such reports will not be viewed as advertisements unless they explicitly promote the products or services offered by the research analyst.
This clarification comes in response to various queries regarding the applicability of the advertisement code to research reports. Earlier, confusion had arisen concerning whether these reports fell under the same regulations as typical advertisements.
The circular states, "Sebi is in receipt of certain queries with respect to the applicability of provisions of advertisement code on a Research Report issued by an RA. In this regard, it is clarified that the Research Report and research recommendations of an RA are not considered advertisement unless anything contained in the research report is in the nature of promotion of products or services offered by an RA."
When Will Advertisement Code Apply?
Additionally, the circular elaborates on the broader scope of what constitutes an advertisement, detailing forms of communication that fall under the advertising code. These include, "pamphlets, circulars, brochures, notices or any other literature, document, information or material published, or designed for use in any publication or displays (such as newspaper, magazine, sign boards/hoardings at any location), in any electronic, wired or wireless communication (such as electronic mail, text messaging, messaging platforms, social media platforms, radio, telephone, or in any other form over the internet) or over any other audio-visual form of communication (such as television, tape recording, video tape recordings, motion pictures) or in any other manner whatsoever."
Furthermore, the circular states, "Further, a research report, irrespective of the mode of its dissemination to any investor or prospective investor, shall be construed as an advertisement if anything contained in the said research report is either expressly or impliedly in the nature of promotion of products or services offered by an RA.”
Sebi has earlier laid down that its regulated entities should not have any association directly or indirectly with any other person who provides advice or recommendations or makes any implicit or explicit claim of return or performance of any securities.
