SEBI proposes unified advertising code, tightens rules on celebrity endorsements in financial marketing

The securities regulator has proposed a sweeping overhaul of advertising rules for financial market intermediaries, seeking to replace a fragmented set of regulations with a single framework that governs how firms communicate with investors.The Securities and Exchange Board of India (SEBI) has floated a Common Advertisement Code (CAC) that would apply across stock brokers, mutual funds, asset management companies, investment advisers, research analysts, portfolio managers, depository participants, online bond platforms and other regulated entities.The proposal comes as financial marketing increasingly shifts to digital and social media platforms. SEBI said a unified framework would help balance investor protection with ease of compliance while creating more consistent standards across the securities market.One of the most significant changes is the proposed move away from prior approval requirements for most advertisements. Instead, firms would be required to upload advertisements, or links to them, to a centralised reporting portal within 24 hours of publication. SEBI argued that reviewing every piece of content in advance is impractical in an environment where firms publish large volumes of social media posts, videos and promotional material each day.Celebrity-led advertising, however, would continue to face tighter scrutiny. Under the proposal, celebrities would be allowed to endorse an entity or brand but not specific financial products or services. SEBI's view is that product-level endorsements may disproportionately influence investor decisions and create unrealistic perceptions about outcomes.The draft code also seeks to address concerns around digital consumer manipulation. Regulated entities would be prohibited from using so-called dark patterns in advertisements and digital communications, in line with consumer protection guidelines issued by the government.The regulator has proposed allowing ratings and rankings in advertisements only when they are issued by a recognised Past Risk and Return Verification Agency (PaRRVA) and accompanied by appropriate disclosures.At the same time, SEBI has clarified that purely educational and investor-awareness content with no promotional intent would not be treated as advertising. The draft framework also exempts certain non-promotional communications, including responses to client queries, regulatory notices, festive greetings and sponsorship announcements that do not contain marketing claims.Recognising the growing importance of mobile and short-format communications, the regulator has proposed allowing abbreviated disclosures in SMS messages, push notifications and pop-ups, provided investors can access complete disclosures through a hyperlink.More broadly, the code would require advertisements to be factual, balanced and easy to understand. It would prohibit misleading claims, exaggerated testimonials, promises of guaranteed or risk-free returns, unfair comparisons, misuse of SEBI's name or logo, and suggestions that past performance guarantees future results.To strengthen oversight, supervisory bodies would operate a centralised reporting portal and monitor compliance. Violations could trigger actions ranging from advertisement withdrawals and onboarding restrictions to monetary penalties and other regulatory measures.The Common Advertisement Code would be implemented through amendments to existing regulations and circulars. SEBI has proposed a six-month transition period and invited public comments on the draft until July 14, 2026.Key ProposalsOne advertising rulebook: A Common Advertisement Code for all investor-facing regulated entities.Post-publication reporting: Most advertisements would no longer require prior approval and must instead be reported within 24 hours.Celebrity restrictions: Celebrities can endorse financial brands or entities but not specific investment products or services.Ban on dark patterns: Advertisements and digital communications cannot use manipulative design practices.Ratings oversight: Rankings and ratings can be used only if issued by a recognised verification agency and accompanied by disclosures.Educational content exempt: Investor awareness and educational material without promotional intent will not be treated as advertising.Short-format disclosure norms: SMS, push notifications and similar formats may use abbreviated disclosures with links to full information.Stronger enforcement: SEBI and supervisory bodies can order ad withdrawals, impose restrictions and initiate penalties for violations.Public consultation open: Comments on the proposal are invited until July 14, 2026, with a six-month implementation window proposed thereafter.