SEBI Common Advertisement Code (CAC) for Regulated Entities

1. Why SEBI Is Proposing a Common Advertisement Code

Today, if a single entity holds SEBI registration in multiple capacities — for example, a stock broker that is also an Online Bond Platform Provider (OBPP) — it must simultaneously navigate multiple, inconsistent advertisement codes issued by multiple exchanges, multiple SEBI circulars, and different supervisory bodies. The same advertisement may technically require approvals from more than one authority, resulting in operational inefficiency and disproportionate compliance burden.

This fragmentation has been particularly burdensome in the digital age, where regulated entities publish dozens of social media posts, educational reels, and promotional pieces every day. Subjecting each item to a manual prior approval process is neither scalable nor effective. Delays in obtaining prior approval can also strip time-sensitive content of its topical relevance before it even goes out.

Across all six major categories of regulated entities — Stock Brokers, Investment Advisers (IAs), Research Analysts (RAs), Mutual Funds/AMCs, Portfolio Managers, and Online Bond Platform Providers — the substantive standards have always been largely consistent: advertisements must be fair, balanced, truthful, transparent, and non-misleading. It is the procedural requirements — approval mechanisms, disclaimers, celebrity endorsement rules, reporting processes — that have diverged sharply across entities.

SEBI's response is to propose a single Common Advertisement Code (CAC), embedded in the SEBI (Intermediaries) Regulations, 2008, to replace every existing entity-specific and exchange-specific advertisement code with a single, technology-enabled, harmonised framework.

2. Background: The Existing Fragmented Framework

Before examining the CAC proposals, it is important to understand the patchwork that currently governs advertisement compliance across entities:

Across all these entities, the existing frameworks share common substantive prohibitions — no guaranteed/risk-free return claims, no rankings/ratings (except for IAs and RAs using PaRRVA-verified metrics), mandatory risk disclaimers. But the procedural architecture is divergent, creating an uneven compliance landscape. Celebrity endorsements provide the starkest example: prohibited across most categories, permitted only for mutual funds at the industry level (with SEBI approval), and not even addressed for Portfolio Managers.

3. Problems the CAC Seeks to Address

SEBI's review has identified three core structural challenges with the current framework:

4. Objectives of the Proposed Common Advertisement Code

The CAC seeks to achieve six stated objectives:

5. Key Proposals in Detail

A. Celebrity Endorsements — Permitted at Brand/Entity Level

Currently, celebrity endorsements are prohibited for Stock Brokers, IAs, RAs, and OBPPs. Only Mutual Funds/AMCs are permitted to use them at the industry level with SEBI's prior approval. Portfolio Managers have no explicit rule. The CAC proposes to uniformly permit celebrity endorsements across all specified regulated entities — but within a carefully defined boundary.

SEBI's rationale is practical: in today's marketing environment, a complete prohibition on celebrity endorsements is no longer appropriate. Such endorsements are a legitimate and widely used means of brand-building across financial and non-financial industries. The key regulatory concern is not brand recognition per se, but the potential for celebrity-driven influence over specific product or investment decisions — which the product-level restriction addresses directly.

Who Is a "Celebrity"? — The Proposed Definition

The consultation paper proposes a detailed, eight-limb definition of "celebrity" — notably broad, covering traditional, digital, and even virtual fame:

The inclusion of virtual characters (AI avatars, fictional digital personas) under the celebrity definition is particularly forward-looking — it signals SEBI's awareness that brand influence in the digital age is no longer limited to human faces.

B. Removal of Mandatory Prior Approval — Post-Issuance Reporting Within 24 Hours

This is perhaps the most operationally significant proposal. For all regulated entities that currently require prior approval — Stock Brokers (from exchanges), OBPPs (from exchanges), IAs and RAs (from supervisory bodies) — the proposal is to replace the prior approval requirement entirely with a post-issuance reporting obligation: advertisements must be reported to the supervisory body promptly, but not later than 24 hours from the time of issuance.

Mutual funds have operated on this post-issuance reporting model for general advertisements for years — the consultation paper points to this as evidence that the oversight model works without prior approval. The proposed shift does not mean reduced oversight; it changes the timing of oversight from a pre-activity gate to a post-activity monitoring mechanism, which is more proportionate and scalable in a high-volume digital environment.

C. Use of Ratings and Rankings in Advertisements — PaRRVA Framework

Currently, ratings and rankings are prohibited across all categories. The CAC proposes to permit regulated entities to advertise ratings and rankings — but only those assigned by a Past Risk and Return Verification Agency (PaRRVA), which is a SEBI-recognised independent body that defines and verifies return metrics. This framework, already used by IAs and RAs for past performance disclosure, is proposed to be extended to all specified regulated entities.

Advertisements using PaRRVA-assigned ratings/rankings must comply with the following conditions:

• The ratings/rankings must be properly explained in the advertisement itself, or by linking to the PaRRVA website or the regulated entity's own website where methodology is disclosed.
• Advertisements must explicitly state that ratings/rankings are only one of the factors to be considered when deciding whether to engage a regulated entity.
• Ratings/rankings must emanate from a study or survey by PaRRVA covering all relevant market participants within that category — ensuring comparability and preventing cherry-picking.
• Any additional conditions specified by SEBI from time to time will also apply.

The PaRRVA-based ratings framework is expected to enable regulated entities to communicate legitimate performance distinctions, promote transparency, and encourage healthy competition based on quality and service standards — while preventing exaggerated, misleading, or unsubstantiated claims.

D. Abbreviated Disclosures for Short-Format Messaging

The existing codes require a comprehensive set of disclaimers in every advertisement. While this is entirely appropriate for long-form content like newspaper ads, TV commercials, or website banners, it creates an impossible compliance situation for short-format messaging like SMS alerts, push notifications, pop-ups, and similar concise electronic communications — where standard character limits exist.

Requiring full disclosures in short-format media either renders those formats unusable or forces disclosures into unreadable fine print — which fails the very transparency objective the disclaimer requirement seeks to serve. The hyperlink approach is a pragmatic middle path.

E. Educational and Investor Awareness Content — Carved Out of Advertising Definition

The existing codes have created significant ambiguity about whether general financial literacy content — an explanation of what an SIP is, how to read a balance sheet, what a mutual fund NAV means — constitutes an "advertisement." This ambiguity has discouraged regulated entities from contributing to the broader SEBI and government objective of investor financial literacy.

The CAC proposes a clear carve-out: content that is purely educational or investor-awareness oriented and carries no promotional intent for products or services of the regulated entity will not be subject to the CAC. However, three conditions must be met for educational content to qualify for this carve-out:

• Minimal and incidental branding only — the entity's name or logo may appear, but only incidentally.
• No promotional call-to-action — the communication must not contain any attempt to influence or induce a purchase decision for a specific product or service.
• Reporting if education-fund-sourced — if the cost of such educational communication is borne from funds earmarked for education and awareness, the communication must be reported to the supervisory body or Board for post-facto monitoring.

F. Prohibition on Dark Patterns

A notable and contemporary addition in the CAC is an express prohibition on dark patterns — deceptive design practices in user interface or user experience interactions that are intended to mislead or trick users into actions they did not originally intend. Current advertisement codes have no such express prohibition.

The proposed prohibition applies to any dark pattern as specified in Annexure I of the Guidelines for Prevention and Regulation of Dark Patterns, 2023 issued by the Central Consumer Protection Authority. Examples explicitly cited in the consultation paper include:

The inclusion of dark pattern regulation within a SEBI advertisement code is significant — it recognises that deceptive UX design in financial apps and platforms is a form of misleading advertising, not merely a consumer protection concern. This creates a direct nexus between SEBI's investor protection mandate and platform design practices.

G. Post-Issuance Monitoring Framework

The shift from prior approval to post-issuance reporting is not meant to reduce regulatory oversight — it restructures it. In place of pre-activity gates, SEBI and SEBI-recognised supervisory bodies will conduct systematic post-issuance monitoring of all reported advertisements, in accordance with policies specified by the Board or the relevant supervisory body.

Non-compliance with the CAC can attract a range of enforcement actions including action under summary proceedings under SEBI (Intermediaries) Regulations, 2008, direction to withdraw specific advertisements, prohibition on issuing new advertisements, stopping onboarding of new clients, and imposition of monetary penalties.

H. Illustrative List of Communications Not Regarded as Advertisements

To remove interpretational ambiguity, the CAC proposes to explicitly list communications that will not be treated as advertisements (provided they contain no promotional, persuasive, or solicitation-oriented content). The proposed list includes:

6. Proposed CAC — Key Provisions in Detail

Definition of Advertisement (Provision 1)

The proposed definition of "advertisement" is media-agnostic and comprehensive. It covers any form of communication, endorsement, or representation — written, audio, visual, verbal, or any other form — disseminated through any channel, including:

• Print media — newspapers, magazines
• Broadcast media — television, radio, podcasts
• Digital media — websites, social media platforms, streaming services, online news sites
• Outdoor media — billboards, transit advertisements, in-store displays

The communication must be issued directly or indirectly by or on behalf of the regulated entity and must have the primary effect of promotion of any product/service, or of solicitation/invitation in respect of any product or service, or promotion of the brand/entity itself.

Supervisory Bodies (Provision 3)

The proposed CAC designates the following supervisory bodies for each category of regulated entity:

Mandatory Disclosures and Disclaimers (Provision 4)

Every advertisement must contain:

• Basic Details: Name of the regulated entity, SEBI registration number, and logo of the regulated entity (if any).
• Disclaimers: As specified by the Board from time to time, displayed in the prescribed manner.

For short-format messaging (SMS, pop-ups, push notifications) where character limits prevent full disclaimer inclusion, a hyperlink to the official website's disclosure page suffices.

General Obligations (Provision 7)

The CAC prescribes the following general obligations for all regulated entities:

• Advertisements must be true, fair, accurate, complete, and unambiguous.
• Advertisements must not be designed so as to be likely to be misunderstood or to disguise the significance of any statement.
• Advertisements must not exploit the lack of experience or knowledge of investors.
• Extensive use of technical/legal terminology or excessive details that may mislead or confuse investors must be avoided.
• Where specific securities or schemes are displayed as examples, a disclaimer — "The securities/scheme(s) are quoted as an example and not as a recommendation" — must appear on the same page or frame as the security/scheme reference, not just at the end of the advertisement.
• Statistical data, graphs, or charts must be backed by disclosed sources, and must include the date/period to which they relate.
• Regulated entities must not provide any form of incentive, voucher, coupon, token, or subscription plan to clients for inducement to trade, activate inactive accounts, invest in schemes, or download mobile applications.
• A suspended regulated entity must not issue any advertisement — directly, indirectly, or jointly with any other entity — during the period of suspension.
• If a third party issues an advertisement on any platform without the regulated entity's consent, the entity must initiate action (including legal action) within seven days, inform the supervisory body, and prominently disclose the incident on its website including details of the third party and action taken.

Prohibitions in Advertisements (Provision 10)

The CAC consolidates all content prohibitions into a single list. Advertisements must not contain:

7. Implementation Architecture

a. Regulatory Enablement

The CAC is proposed to be implemented through amendments to the SEBI (Intermediaries) Regulations, 2008, amendments to the concerned regulations governing each category of specified regulated entity, and operational circulars prescribing detailed requirements.

b. Common Digital Reporting Portal

A centralised digital advertisement reporting system will be developed by supervisory bodies, allowing all regulated entities to upload their advertisements or provide links to them — within 24 hours of issuance. For entities subject to multiple supervisory bodies, a common platform accessible to all relevant supervisory bodies shall be developed, eliminating the need for separate submissions to multiple authorities.

c. Celebrity Advertisement Approval System

Supervisory bodies will separately develop systems for submitting celebrity endorsement advertisements for prior approval. These systems must include: acknowledgement of receipt of approval requests, real-time status tracking, and support/grievance redressal for queries related to the application. Supervisory bodies may integrate the celebrity approval facility into the main advertisement reporting portal.

d. Monitoring, Enforcement, and Penalties

Supervisory bodies will develop systematic monitoring processes for advertisements reported to them. Non-compliance enforcement tools include:

• Action under summary proceedings under SEBI (Intermediaries) Regulations, 2008
• Direction to withdraw specific advertisements
• Direction to refrain from issuing future advertisements
• Direction to stop onboarding new clients
• Imposition of monetary penalties

e. Transition Period

8. SEBI's Specific Questions for Public Consultation

SEBI has framed five specific consultation questions. Responses may be submitted by July 14, 2026:

9. CorpLawUpdates Analysis

The CAC consultation paper is substantively progressive and long overdue. The existing advertisement compliance framework was built incrementally over decades — entity by entity, exchange by exchange — resulting in a patchwork that serves neither the regulator's oversight objectives nor the regulated entities' operational realities. Consolidation into a single statutory chapter is the right structural direction.

The 24-hour post-issuance reporting shift is the most impactful operational change. For individual Research Analysts and Investment Advisers who publish market commentary daily, the abolition of prior approval is a genuine compliance relief. For compliance officers at larger firms, it shifts the internal workflow from pre-publication clearance to a real-time post-publication log — a fundamentally different but more manageable process in a digital-first content environment.

The celebrity endorsement liberalisation is commercially significant but carefully bounded. The brand-level restriction (no product-specific endorsements) is an intelligent regulatory design choice. It allows firms to build brand trust through star power while preventing the credibility of a celebrity from directly influencing a specific investment decision — which is the genuinely concerning regulatory scenario.

The dark pattern prohibition is the most forward-looking addition. As regulated entities build increasingly sophisticated apps and digital platforms, the line between UX design and deceptive practice has become blurry. Incorporating the CCPA's dark pattern framework into SEBI's advertisement code creates a clear standard and enforcement jurisdiction for financial services digital product design.

Watch out for the 5-lakh-follower influencer threshold. The "celebrity" definition captures social media influencers with more than 5 lakh followers per handle — a wide net that could pull in a large number of financial content creators (finfluencers) who appear in financial product advertisements. This definition, combined with the brand-level-only endorsement restriction, will significantly constrain how regulated entities structure their influencer marketing programmes.

For Professionals advising regulated entities, this consultation paper warrants careful review before the July 14 deadline. The CAC, once notified, will be the primary statutory reference for all advertisement compliance across the specified entity categories — making familiarity with its provisions essential.