Portfolio managers are subject to a comprehensive Advertisement Code that governs all marketing communications. This article explains what you can and cannot say in marketing materials.
The Regulatory Framework
Applicability
The advertisement code applies to all forms of communications, issued by or on behalf of a portfolio manager, that may influence investment decisions of any investor or prospective investor.
Covered Communications
The advertisement code applies to:
- Pamphlets, circulars, brochures
- Notices
- Electronic communications
- Social media platforms
- Broadcast (radio, television, telephone)
- Internet and web-based communications
- Audio-visual materials
- Any other manner whatsoever
Code of Advertisement
SEBI has formulated a Code of Advertisement governing any advertisements issued by portfolio managers in connection with their activities. All portfolio managers registered with SEBI are required to strictly observe the Code of Advertisement.
What You Can Say
Factual Information
Advertisements shall be truthful, fair and clear. You can communicate factual information that is:
- Accurate and true
- Complete
- Unambiguous and concise
- Not false or misleading
Standard Disclaimers
Advertisements must include:
- "Investment in securities market are subject to market risks. Read all the related documents carefully before investing."
- "Registration granted by SEBI, enlistment and certification in no way guarantee performance of the intermediary or provide any assurance of returns to investors."
TWRR with Benchmark
Portfolio Manager shall present the TWRR of the IA along with the trailing return of the selected benchmark when communicating, advertising, publishing, or mentioning performance of an Investment Approach.
PaRRVA-Verified Data
Performance numbers in any advertisement, pitch deck, brochure, mailer, website page or social post must now come from PaRRVA-verified data.
What You Cannot Say
False or Misleading Statements
Advertisements shall not contain:
- Statements that are false
- Statements that are misleading
- Biased statements
- Deceptive statements based on assumptions or projections
Exaggerated Claims
SEBI has asked portfolio managers not to make unrealistic and exaggerated claims about their performance and returns. Superlative or unsubstantiated advertisements and claims about past performance and returns are prohibited.
Promise of Assured Returns
Advertisements shall not contain any promise or guarantee of assured/fixed return to the investors, either directly or indirectly.
Minimizing Risk
Advertisements cannot minimize market risks. Statements inconsistent with the nature and risk of the product are prohibited.
Improper Comparisons
Advertisements shall not compare one Portfolio Manager with another, implicitly or explicitly, unless the comparison is fair and all information relevant to the comparison is included.
Superlative Terms
Advertisements shall not contain "Best", "No. 1", "Leading", "Top Research Analyst", or similar superlative terms.
Brand Name vs SEBI-Registered Name
Disclosure Requirements
The following must be prominently displayed in advertisements:
- Name of the portfolio manager as registered with SEBI
- Complete registered office address
- SEBI registration number
- Logo/brand name/trade name
- CIN, if applicable
Website Display
The portfolio manager shall mention its registration number contained in the certificate of registration in all the correspondence with SEBI, other authorities, Stock Exchanges and the clients of the portfolio manager.
Recent Developments
Common Advertisement Code
SEBI has proposed a Common Advertisement Code to replace the existing fragmented, entity-specific advertisement frameworks. Celebrity endorsements would be allowed at the entity or brand level, but not for specific products or services.
Enforcement
SEBI has directed PMS players to remove all misleading and exaggerated advertisements issued in the public domain. The regulator has clarified that this advisory does not preclude it from taking appropriate action against any entity found in violation.
Expert Legal Guidance
Anuj Desai & Associates provides expert legal advisory services on PMS advertisement code compliance. Our securities law experts help portfolio managers develop compliant marketing materials, review advertisements, and ensure regulatory compliance. Contact us for guidance on advertisement code and other regulatory matters.