SEBI Opens Door To Celebrity Endorsements In Ad Rule Overhaul For Brokers, Advisers

India's market regulator, the Securities and Exchange Board of India (SEBI), has proposed allowing celebrity endorsements for brokers, investment advisers and other market intermediaries as part of a sweeping overhaul of advertising regulations that would also eliminate most pre-approval requirements and replace them with post-facto reporting.

In a consultation paper released on Tuesday, SEBI proposed a Common Advertisement Code covering stock brokers, depository participants, investment advisers, research analysts, online bond platform providers, portfolio managers and mutual funds. The move seeks to replace a fragmented framework of entity-specific advertisement rules with a single code aimed at reducing compliance burdens while maintaining investor safeguards.

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The regulator has proposed permitting celebrities to endorse regulated entities at the brand level, a significant departure from existing restrictions that prohibit such endorsements for several categories of intermediaries. However, celebrities would not be allowed to endorse specific products or services, as SEBI said such promotions could unduly influence investor decisions by creating perceptions about suitability or expected returns.

Advertisements featuring celebrities would continue to require prior approval from the relevant supervisory body.

The biggest operational change proposed by the regulator is the removal of mandatory prior approval requirements for advertisements issued by brokers, online bond platform providers, investment advisers and research analysts. Instead, entities would be required to upload or report advertisements within 24 hours of issuance under a post-facto monitoring framework.

SEBI said the existing approval process was designed for traditional advertising channels but has become increasingly cumbersome as regulated entities now publish social media posts, reels and promotional content on a daily basis. The regulator noted that the mutual fund industry already operates under a post-issuance reporting model.

Dharmesh Jadav, Partner, Internal Audit & Risk Advisory at Nangia Global, said the proposed framework could significantly reduce compliance bottlenecks for market intermediaries while preserving investor safeguards.

"SEBI's proposed Common Advertisement Code (CAC) is a much-needed reform," Jadav said. "Moving to 24-hour post-issuance reporting, a unified code, and permitted celebrity endorsements should ease doing business without diluting investor protection."

Another key proposal would allow regulated entities to use ratings and rankings in advertisements if they are assigned by a Past Risk and Return Verification Agency, or PaRRVA, and accompanied by disclosures explaining their methodology and limitations. Currently, the use of rankings and ratings is largely prohibited across most categories of regulated entities.

The regulator has also proposed exempting purely educational and investor-awareness content from advertisement regulations, provided such communication does not contain promotional intent or attempts to solicit business. The move is expected to provide greater clarity for financial literacy initiatives undertaken by market participants.

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Further, SEBI plans to explicitly prohibit the use of "dark patterns" in advertisements, including practices such as false urgency, forced actions and subscription traps that may manipulate investor behaviour.

However, Jadav cautioned that the shift away from pre-approval could create fresh supervisory challenges if monitoring mechanisms are not robust enough.

"Since ads go out before being checked, a misleading ad could reach people first and harm them," Jadav said. "The plan also doesn't say much about tracking ads that go viral quickly or holding celebrities responsible when they mislead people."

SEBI has invited public comments on the proposals until July 14.

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