The Securities and Exchange Board of India (Sebi) on Wednesday issued new guidelines on advertisements for the registered investment advisers (IAs) and research analysts (RAs) under their respective regulations.
The changes were brought to Sebi investment adviser regulations 2013 and Sebi research analyst rules 2014, related to the code of conduct for IAs and RAs while issuing any advertisement that may influence investor decisions.
In its notification, Sebi has directed all its registered IAs and RAs to ensure compliance with its order on the advertisement code, which primarily includes three broad areas: forms of communication, disclosures in the advertisement, prohibitions in the advertisement, and other compliances or requirements.
Where the Code Will Apply
It said the code would apply to all forms of communication, including pamphlets, circulars, brochures, notices, research reports, and material designed for use in any publication or displays, such as newspapers, magazines, signboards, mail, text messaging, messaging platforms, etc., that may influence investment decisions.
The communication channels may also include social media platforms, radio, telephone, television, tape recording or any other form on the internet.
It has also made it mandatory for the IAs and RAs to disclose information about their registered office addresses, whether they are registered members, registration number and logo or brand name, among others in the in the advertisement.
In addition, it said, the information must be “accurate, true, complete, and concise” without any unambiguousness. They must also carry “standard warning” in readable fonts (minimum 10 font size), stating “Investment in securities market are subject to market risks. Read all the related documents carefully before investing.”
Sebi stressed that “no addition or deletion of words shall be made to/from the standard warning.”
Audio-Visual Adverts
For audio-visual-based advertisements, the visual element should accompany the voiceover reiteration of the warning that is clear and audible. For example, it said, both the visual and the voiceover reiteration in a standard warning must contain 20 words or at least a 10-second runtime to be considered “clear and understandable”.
If the ad language is other than English, then they must ensure the standard warning is accurately translated in the advertisement language.
Also, if the mode of advertisement is through SMSes, messages, pop-ups, social media, etc., and their details are not mentioned, then the IAs and the RAs must add their website hyperlinks in such communication. In case any specific security is displayed in the advert as an example, they should carry a disclaimer saying that “The securities quoted are for illustration only and are not recommendatory”.
Issuing Disclaimers
In addition, any advertisement, communications or correspondences with clients should include the disclaimer that “Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.”
The advert must also not contain anything prohibited for publication under the law. For example, false, misleading, biased or deceptive statements based on projections. It has banned the use of any statement that may mislead the investor.
It has also asked them to take prior approval for publishing an advertisement from Sebi or any other recognised supervisory body.
The IAs and RAs will also not engage in games, leagues, schemes, and competitions that may involve distribution of prize money, medals, gifts, etc.
Sebi said, “These norms shall be applicable to any other investment, research, and consultancy agency associated with the IAs/RAs concerned and issuing advertisement wherein the IA/RA has been named in the advertisement.” In addition, it has issued several other ad guidelines for the IAs and RAs.
