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Sebi takes slew of measures to crack down on misleading investment ads

Market regulator Securities and Exchange Board of India (Sebi) has announced a slew of measures to crack down on investment advisors and analysts making misleading advertisements or claims in order to solicit investments.

In a circular issued on Wednesday, Sebi prohibited the use of terms like ‘Best’, ‘No. 1’, ‘Top’, ‘leading’, and ‘one of the best amongst market leaders’, among others in any form of advertisement.

Sebi’s descriptive list of prohibitions and disclosures come amid rising cases and complaints on social media against some entities promising stellar returns and making other misleading claims and projections.

Along with a stringent list of dos and don’ts on terms and disclosures, the market watchdog has prescribed additional compliance requirements, including the need to retain the copy of advertisements for five years and refraining from reference of past performance.

Investment advisors and research analysts have been asked to seek prior approval of the advertisement from a Sebi-recognised supervisory body before issuing it.

The registered entities have also been directed not to engage in games, leagues, competitions or schemes which involve any kind of gift, medals or prize money.

In view of investor protection, biased, deceptive claims, statements which may be based on assumptions and projections, and use of misleading testimonials have also been restricted.

Statements which directly or indirectly discredit other advertisements or makes unfair comparisons or ascribes any qualitative advantage over other intermediaries directly or indirectly, have also been prohibited.

The market watchdog has directed the investment advisors and analysts to not extensively use technical terminology or complex language, indicating that this could exploit the lack of experience or knowledge of the investors.

These written-to-detail norms will be applicable on all forms of communication including print advertisements, circulars, brochures, research reports, sign boards, social media platforms, radio, any electronic mode, audio-visual mode, or any other form.

Furthermore, all ads will be required to prominently carry standard disclaimer “investment in securities market are subject to market risks.”

“In case the mode of advertisement is SMS/Message/Pop-up, social media etc. and the details such as full name, logo/brand name, full registered office address, SEBI registration number, membership number of a SEBI recognized supervisory body and standard disclaimer are not mentioned, then official website hyperlink should be provided in such SMS/Message/Pop-up, etc. and the website must contain all such details,” said Sebi.        

The move will help ensure accountability and take action against those flouting the norms, said experts.

Among the disclosures, the players have been asked to give information on their registration number, logo, office address and standard warning and disclaimers.

Further, the investment advisors cannot promise or guarantee assured, risk free return, target return or percentage accuracy or any such claim that gives the impression that the advice or recommendation is risk-free.

Separately, on Wednesday, stock exchanges also cautioned investors to avoid schemes or products that promised assured returns.

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