Advertisement Code for Research Analysts – Complete Compliance Guide

The Securities and Exchange Board of India (SEBI) has established a comprehensive Advertisement Code for Research Analysts (RAs) to ensure that all marketing and promotional communications are fair, transparent, and not misleading. This code is specified in the circular dated April 5, 2023 (SEBI/HO/MIRSD/MIRSD-PoD-2/P/CIR/2023/51) and has been incorporated into the Master Circular for Research Analysts. This article provides a complete compliance guide to the Advertisement Code.

Regulatory Basis

The Advertisement Code for RAs is issued under the powers conferred under Section 11(1) of the SEBI Act, 1992, read with Regulation 33 of the SEBI (Research Analysts) Regulations, 2014. The circular is applicable to all registered RAs and came into effect from May 1, 2023.

Key Regulatory Documents

Scope of the Advertisement Code

Definition of Advertisement

An advertisement includes all forms of communications, issued by or on behalf of an RA, that may influence investment decisions of any investor or prospective investor.

Forms of Communication Covered

The Advertisement Code applies to all forms of communications, including:

Print Media

• Pamphlets
• Circulars
• Brochures
• Notices
• Newspapers
• Magazines
• Sign boards
• Hoardings

Electronic Media

• Websites
• Mobile applications
• Electronic mail (email)
• Text messaging
• Messaging platforms
• Social media platforms
• Radio
• Telephone

Audio-Visual Media

• Television
• Tape recordings
• Video tape recordings
• Motion pictures

Other Media

• Any other literature, document, information or material published
• Any other audio-visual form of communication
• Any other manner whatsoever

When a Research Report Becomes an Advertisement

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.

This clarification was issued on October 24, 2024 (SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/146) and is a critical distinction. RAs must carefully evaluate whether their research reports contain promotional content that would trigger the Advertisement Code.

Mandatory Information and Disclosures in Advertisements

1. Name and Registration Details

Every advertisement must contain:

• Name of the RA as registered with SEBI
• Registered office address
• SEBI Registration Number
• Logo/brand name/trade name of RA
• CIN of the RA (if applicable)

2. Accurate and True Information

• Information must be accurate, true, and complete
• Must be in unambiguous and concise language

3. Standard Warning

The advertisement must contain the standard warning in legible fonts (minimum 10 font size):

"Investment in securities market are subject to market risks. Read all the related documents carefully before investing."

Important: No addition or deletion of words shall be made to/from the standard warning.

4. Audio-Visual Media Requirements

For audio-visual media based advertisements:

• The standard warning in visual media based advertisement must be accompanied by a voice over reiteration
• Both visual and voice over must be audible in a clear and understandable manner
• The standard warning containing 20 words running for at least 10 seconds may be considered as clear and understandable

5. Language Requirements

Whenever the advertisement is being issued in a language other than English, it must be ensured that the standard warning is accurately translated in the language of the advertisement.

6. SMS/Message/Pop-up/Social Media Requirements

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 must be provided
• The website must contain all such details

7. Security Examples

In case any specific security/securities are displayed in the advertisement as examples, the following disclaimer must be mentioned:

"The securities quoted are for illustration only and are not recommendatory."

8. Registration Disclaimer

Advertisements and communications/correspondences with clients shall include the disclaimer:

"Registration granted by SEBI, enlistment with BSE and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors."

Prohibited Content in Advertisements

1. Prohibited Publications

Anything which is prohibited for publication under the law shall not be included.

2. False, Misleading, Biased, or Deceptive Statements

Statements which are false, misleading, biased or deceptive, based on assumptions or projections, are prohibited.

3. Misleading Testimonials

Any misleading or deceptive testimonials are prohibited.

4. Misleading Statements

Statements which, directly or by implication or by omission, may mislead the investor are prohibited.

5. Misunderstood Statements

Any statement likely to be misunderstood or likely to disguise the significance of the same or any other statement contained in the advertisement is prohibited.

6. Exploitation of Investor Lack of Experience

Any statement designed to exploit the lack of experience or knowledge of the investors is prohibited.

7. Exaggerated Statements

Any statement that is exaggerated or is inconsistent with or unrelated to the nature and risk and return profile of the product is prohibited.

8. Excessive Technical or Legal Terminology

Extensive use of technical or legal terminology or complex language and the inclusion of excessive details which may distract the investors is prohibited.

9. False "Free" Claims

Reference to any report, analysis, or service as free, unless it actually is free and without condition or obligation, is prohibited.

10. Assured Returns or Guarantees

Any promise or guarantee of assured or risk free return to the investors is prohibited. The advertisement shall not imply any assured returns or minimum returns or target return or percentage accuracy or service provision till achievement of target returns or any other nomenclature that gives the impression to the client that:

• The recommendation of research report is risk-free
• The recommendation is not susceptible to market risks
• The recommendation can generate returns with any level of assurance

11. Discrediting Others

Any statement which directly or indirectly discredits other advertisements or intermediaries or makes unfair comparisons or ascribes any qualitative advantage over other intermediaries directly or indirectly is prohibited.

12. Past Performance Claims

Reference to past performance or risk-return metrics in respect of the services of Research Analyst is prohibited unless:

• Such risk-return metrics are verified by Past Risk and Return Verification Agency (PaRRVA)
• Claims using such metrics are made in the manner specified by SEBI

13. Superlative Terms

Superlative terms such as "Best", "No. 1", "Top Research Analyst", "Leading", "One of the best amongst market leaders", etc. are prohibited.

Exception: Factual details of awards received by the RA from independent organizations may be included.

14. SEBI Logo

Advertisements shall not include SEBI Logo.

Other Compliance Requirements

1. Prior Approval

Prior approval for the advertisement/material shall be obtained from SEBI recognized supervisory body (RAASB) before issue.

2. Suspension of RA

In the event of suspension of any RA by SEBI, the RA so suspended shall not issue any advertisement either singly or jointly with any other RA, during the period of suspension.

3. Games, Leagues, Schemes, Competitions

The RA shall not engage in games, leagues, schemes, competitions etc. which may involve distribution of prize monies, medals, gifts, etc.

4. Associated Entities

These norms shall be applicable to any other investment/research/consultancy agency associated with the RA concerned and issuing advertisement wherein the RA has been named in the advertisement.

5. Retention of Advertisement Copies

Copy of the advertisement shall be retained by RA for a period of five years in terms of Regulation 25(2) of SEBI (Research Analysts) Regulations, 2014.

6. Additional Guidelines

Any additional guidelines as may be specified by SEBI or SEBI recognized supervisory body from time to time.

Practical Implementation Guide

Step 1: Identify All Communications

Identify all forms of communications that may be considered advertisements.

Step 2: Review Content

Review all content for:

• Accuracy and truthfulness
• Mandatory disclosures
• Prohibited content

Step 3: Obtain Approval

Obtain prior approval from RAASB for all advertisements.

Step 4: Include Disclaimers

Include all required disclaimers and warnings.

Step 5: Retain Records

Retain copies of all advertisements for five years.

Step 6: Monitor Compliance

Monitor ongoing compliance with the Advertisement Code.

Common Compliance Gaps

1. Not Obtaining Prior Approval

Some RAs issue advertisements without obtaining prior approval from RAASB.

Solution: Obtain prior approval for all advertisements.

2. Missing Mandatory Disclosures

Some RAs omit mandatory disclosures in advertisements.

Solution: Include all mandatory disclosures.

3. Using Prohibited Content

Some RAs use prohibited content in advertisements.

Solution: Avoid all prohibited content.

4. Inadequate Standard Warning

Some RAs do not include the standard warning or use incorrect wording.

Solution: Include the standard warning verbatim.

5. Not Retaining Copies

Some RAs do not retain copies of advertisements.

Solution: Retain copies for five years.

Conclusion and How Anuj Desai & Associates Can Help

The Advertisement Code for Research Analysts is a comprehensive framework that ensures all marketing communications are fair, transparent, and not misleading. Compliance requires careful attention to both the mandatory requirements and the prohibitions.

Anuj Desai & Associates offers specialized services to help RAs comply with the Advertisement Code:

• Review of all marketing and promotional materials
• Guidance on mandatory disclosures and prohibitions
• Assistance with prior approval from RAASB
• Development of advertising compliance policies
• Compliance audit and advisory

Contact us today to ensure your advertisements comply with SEBI requirements. Our team will review your marketing materials and provide a tailored compliance roadmap.

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Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.

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