Markets regulator Sebi is proposing a common advertisement code for all its regulated entities, allowing individual mutual funds to use celebrity endorsements at the brand level — an option not currently permitted, according to a consultation paper released by the regulator. At present, only AMFI, the industry trade body, can use such endorsements for the mutual fund industry as a whole.
Key Proposals Under the Common Advertisement Code
Sebi's consultation paper outlines several major changes to the current advertising framework for regulated entities. The proposed Common Advertisement Code (CAC) aims to replace the existing fragmented, entity-specific advertisement frameworks applicable to stock brokers, depository participants, investment advisers, research analysts, online bond platform providers, portfolio managers, and mutual funds/AMCs, a Sebi release said.
| Aspect | Current System | Proposed System |
|---|---|---|
| Celebrity endorsements | Allowed only at industry level by AMFI | Allowed at brand level for individual fund houses |
| Endorsement scope | Industry-wide only | Brand-level only; not for specific products |
| Advertisement approval | Pre-approval required from regulator | Post-advertisement reporting to regulator |
| Regulatory framework | Fragmented, entity-specific codes | Unified Common Advertisement Code (CAC) |
| Reporting platform | Multiple supervisory bodies, varied processes | Single technology-enabled common reporting platform |
The regulator specified that celebrity endorsements will be subject to prescribed conditions and prior approval. Fund houses will not be permitted to advertise a celebrity endorsing a specific product such as a flexicap fund, but can endorse the fund house as a whole.
Shift from Pre-Approval to Post-Reporting
A significant operational change proposed is the move from pre-advertisement approval to requiring entities to file post-advertisement reports with the regulator, the consultation paper said. This aligns with Sebi's broader objective of balancing ease of doing business with investor protection.
Sebi is also proposing a unified, technology-enabled advertisement framework that includes a common reporting platform for regulated entities with multiple supervisory bodies. "The unified reporting mechanism is expected to bring in operational efficiency along with regulatory oversight," the Sebi release stated.
Implications for Mutual Fund Houses and Investors
For mutual fund houses, the ability to use celebrity endorsements at the brand level opens new marketing avenues while complying with conditions. The shift to post-reporting reduces compliance burden compared to the current pre-approval system. However, fund houses must ensure that celebrity endorsements do not mislead investors about specific product performance.
The unified reporting platform is expected to streamline compliance for entities that currently report to multiple supervisory bodies, reducing duplication and operational costs. The CAC replaces fragmented codes, providing a consistent set of rules across regulated entities.
Investor protection remains a focus, with Sebi retaining prior approval for celebrity endorsements and restricting them to brand-level only. The technology-enabled framework also aims to enhance regulatory oversight through data-driven monitoring.
The consultation paper marks a significant step toward modernising India's financial advertisement regulations, potentially setting a precedent for other emerging markets. Industry participants are expected to provide feedback before final rules are notified.
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