Sebi allows celebrity endorsements in MFs; issues new ad code

Regulator Sebi today allowed celebrities to endorse mutual fund products at the industry level and issued new advertising code that will require fund houses to communicate in a simple manner with the public.
The capital markets watchdog has reviewed advertisement guidelines for mutual funds with regard to disclosing performance related information about such products.
In a circular, Sebi said that it has permitted celebrity endorsements at industry level, for the purpose of increasing awareness of mutual funds as a financial product category, with immediate effect.
However, such endorsements celebrity endorsements should not promote a scheme of a particular mutual fund or be used as a branding exercise of an asset management company (AMC).

Besides, expenses towards such endorsements should be limited to the amounts that are aggregated by mutual funds at industry level (two basis points of daily net assets) for conducting investor education and awareness initiatives.
Moreover, a prior approval of Sebi would be required for issuance of such advertisements which feature celebrities.

Performance of mutual fund schemes should be advertised in terms of CAGR for the past one year, three years, five years and since inception, in place of current requirement to publish scheme's returns for as many as 12-month periods as possible for the past three years from April onwards.

Besides, performance advertisement of mutual fund schemes should provide information based on last day of month-end preceding the date of advertisement, instead of current requirement of publishing such data based on last day of preceding quarter-end.
Performance of other schemes managed by the fund manager should be disclosed in a summarised manner. Sebi has permitted mutual funds to provide an exact link to such summarised information.