Advisors Can't Use 'Best', 'No. 1' For Investment Advice, SEBI Says

SEBI-regulated investment advisers and research analysts would now have to ensure that the standard warning in their advertisements is legible and understandable to their target audience.

The standard warning that goes: "Investments in securities market are subject to market risks. Read all the scheme-related documents carefully before investing", should be in legible fonts (minimum 10 font size), SEBI said in changes to the code applicable to these entities.

Additionally, any audio-visual reiteration of the warning shall be clear and understandable. A warning that contains 20 words and that runs for 10 seconds, both visually and verbally, will be considered clear.

The code also provides clarity as to the forms of communication that would be considered advertising. Any form of communication by or on behalf of the IA or RA that influences investment decisions would be considered advertising.

This includes pamphlets, circulars, brochures, notices, research reports or any other literature. It may also include any form of communication made through any electronic, wired or wireless communication, such as text messaging, telephone, television, etc.

The advertisement shall contain information such as the name, logo, registered address, and other such information regarding the publisher. It must provide information in an accurate and unambiguous language.

The advertisements shall not contain any misleading or ambiguous information or anything that's prohibited under the law. It shall not exploit the lack of knowledge or experience of the investor.

Advisers and research analysts are also barred from using superlative terms such as "Best", "No. 1", "Leading" and Top Adviser/Research Analyst in their advertisements. They are also barred from using the SEBI logo for such purposes.

In other restrictions, all IAs and RAs shall procure prior approval for their advertisements from a SEBI-recognised supervisory body, such as BSE Administration and Supervision Ltd. in the case of IAs. They are also barred from engaging in any competitions, schemes, or games that may involve the distribution of money and gifts.

These restrictions are also applicable to any other investment, research, or consultancy agency associated with the IA or RA concerned and issuing advertisements with their name.

The code shall become applicable on May 1.