Sebi draft rules put finance influencers under watch

India’s markets regulator Sebi wants to redraw the boundary between celebrity endorsement and financial advertising, proposing rules that could treat an influencer with more than 500,000 followers as a celebrity if they promote a broker, mutual fund, research platform or other regulated market entity.

The Securities and Exchange Board of India (Sebi), in a consultation paper issued on Tuesday, proposed a Common Advertisement Code for investor-facing regulated entities, replacing a patchwork of rules that currently differs across brokers, mutual funds, investment advisers, research analysts, portfolio managers, depository participants and online bond platforms.

The draft is open for public comments until 14 July.

If adopted, it would mark one of Sebi’s sharper attempts to bring India’s financial advertising rules in line with the way investment products are now sold, explained and sometimes hyped: through social media posts, reels, podcasts, videos, mobile notifications and influencer-led campaigns.

Sebi’s draft would include people appearing in the top 50 of a publicly available celebrity index issued by a reputed national publication, actors in leading roles across films, television and OTT platforms, and influencers with more than 500,000 followers or subscribers on a single social media handle, including YouTube, Instagram, Facebook and Twitter.

The draft also seeks to cover sportspersons who have represented India or another country at the international level, television hosts and anchors, winners and runners-up of prominent reality or competitive shows, and human-like virtual characters or avatars capable of influencing audiences.

Sebi has also proposed giving itself, or a Sebi-recognized supervisory body, discretion to classify a person or character as a celebrity if that figure is capable of influencing viewers of an advertisement.

The regulator is not proposing a blanket ban on celebrity advertising. Instead, it wants to permit endorsements at the brand or entity level, while barring endorsements of specific products or services.

A broker, for instance, may be able to hire a celebrity to promote its brand. A mutual fund house may be able to use a known figure to build visibility. But the celebrity would not be allowed to endorse a particular scheme, trading product, advisory call or service in a way that could push investors toward a decision.

“While a brand endorsement merely reflects a general association with the entity, endorsement of a particular product or service may unduly influence investors’ decisions by creating perceptions regarding its suitability or expected outcomes,” Sebi said in the consultation paper.

The distinction matters in a market where retail participation has grown sharply and digital marketing has become inseparable from investor acquisition.

Financial firms now advertise through short videos, push notifications, sponsored posts, webinars and app-led campaigns, often mixing education, brand-building and solicitation in formats that are easy to consume and hard to police.

Sebi’s draft acknowledges that problem. It proposes doing away with most prior approvals for advertisements and replacing them with post-issuance reporting, generally within 24 hours. The regulator said the current approval model can be inefficient when firms publish multiple pieces of digital content each day.

“In this digital era, regulated entities publish dozens of social media posts, educational reels and promotional content pieces daily,” Sebi said, adding that prior approval of each item may erode the relevance of time-sensitive advertising.

Celebrity advertisements would remain an exception. Ads featuring celebrities would require prior approval from the relevant supervisory body or Sebi, where no such body has been specified.

The proposed code also makes clear that celebrity endorsement costs cannot be passed on to clients or charged to a mutual fund scheme. Such advertisements would need to carry the prescribed disclaimers.

The broader code is meant to replace multiple entity-specific and exchange-specific advertisement codes with a single framework. It would be adopted as a chapter under the Sebi (Intermediaries) Regulations, 2008, giving the rules a common statutory base across specified regulated entities.

Under the draft, advertisements would have to be true, fair, accurate, complete and unambiguous. They must not be designed in a way that could be misunderstood or disguise the significance of a statement. They must not exploit investors’ lack of experience or knowledge.

The code would require advertisements to carry basic details, including the name of the regulated entity, Sebi registration number and logo, if any. For short-format communications such as SMS, pop-ups and push notifications, where full disclosures may not fit, Sebi has proposed allowing a hyperlink to detailed disclaimers on the regulated entity’s website.

The proposal also tries to separate genuine investor education from advertising. Educational or informational content meant to impart financial knowledge or training would not be treated as an advertisement, provided it does not promote products or services or solicit investor interest. Branding in such content would have to remain minimal and incidental.

The regulator has also proposed an explicit ban on dark patterns in financial advertising, referring to deceptive design practices such as false urgency, forced action and subscription traps. That would bring financial-market advertising closer to consumer-protection rules already issued by the Central Consumer Protection Authority.

Sebi also wants to allow regulated entities to use ratings and rankings assigned by a Past Risk and Return Verification Agency, or PaRRVA, subject to disclosure conditions. The idea is to let firms communicate legitimate distinctions without turning rankings into another machinery of misleading claims.