Corporate Ads: New Ruling On Cards

According to a Sebi source, the proposal has been prepared by the primary market department and will be taken up for approval in the forthcoming board meeting in September.

At present, corporate advertising has been banned by Sebi within 40 days prior to the public issue.

The regulator is reviewing its decision as many corporates have requested to change its stand.

Sebi is planning to allow companies to issue advertisements which will carry a note on the forthcoming public issue. Soon after they receive the acknowledgement card, they can issue advertisements with a line that can be put at the end of the ad, stating that the public issue will soon be made, he added.

The Association of Financial Advertising Agencies Association of India had earlier suggested to Sebi that in all corporate advertisements they can carry a message suggesting the company will shortly make a public issue and investors are advised to read risk factors carefully in the advertisement, prospectus and application form.

The Malegam Committee took a stand earlier that corporate advertising is not following Sebi guidelines and suggestions. Moreover, misleading statements appear through a well-orchestrated corporate campaign over which the merchant bankers have little or no control. Hence corporate advertisements were banned after the issue of acknowledgement card.

However, Sebi permitted corporate advertisement after the issue of the acknowledgement card with a mention of all the risk factors later.

But issuers have found it difficult to prepare such campaigns and there have been no corporate advertising at all by issuers 40 days prior to the public issues.