New advertisement code makes registered investment advisors see red

RIAs cry foul over disparity as finfluencers don't have to bear additional costs or regulatory compliance

Markets regulator SEBI’s latest norms on advertisements has put the registered investment advisors (RIAs) in a fix as they are seeking clarification on a clutch of issues, including what qualifies as an advertisement.

Starting May 1, the Securities and Exchange Board of India (Sebi) has mandated investment advisors and research analysts to seek prior approval of advertisement from SEBI-recognised BSE Administration & Supervision Ltd (BASL).

BASL has seen a host of queries seeking clarity on charges and what qualifies as an advertisement. RIAs are also raising objections on increased cost and compliance burden along with the free run enjoyed by the financial influencers.

“Initial period confusion remains on several fronts-- like can I do a client awareness workshop or give an interview to the media without approval. Also, what about social media posts done earlier. Based on how frequently we would have to seek approval, our business will have cost implications. Not clear if the website approval is mandatory. The entire set of client communication needs review now,” said Rohit Shah, Founder and CEO at GYR Financial Planners.

“On the other hand, fin-influencers continue to enjoy a free run. RIAs are unhappy with the regulator's attempt to enhance the already tight regulations,” said a Mumbai-based RIA.

According to the RIAs, BASL has charted out the fee structure for processing advertisement approvals.

Under the structure, individuals or sole proprietorships will be charged Rs 3000 as processing fee while the fee will be Rs 4,500 and Rs 6,000 for partnership firms and corporates, respectively. These charges will be excluding the taxes.

“BASL enrolled members can forward their advertisement/material for BASL approval by submitting the application along with relevant documents and details on BASL Membership portal (wherein a separate section for Advertisement Application) has been provided,” said BASL in a circular issued earlier.

“Such processes for approval have already been in place for stock brokers. And in accordance with the earlier code, the new one will also be required only on the set formats with basic details of investment advisors,” said an official.

Some of the industry players shared that many of their queries on the definition of an advertisement were not answered properly by BASL in a session conducted by the Association for Registered Investment Advisors (ARIA).

These queries were on whether awareness programs and genuine testimonials on websites will constitute as an advertisement.

In a circular issued on April 5, Sebi announced a slew of measures for curbing misleading advertisements prescribing additional compliance requirements, including the need to retain the copy of advertisements for five years and refraining from reference of past performance.

The registered entities have also been directed not to use superlative terms, complex language, and deceptive claims along with a directive to not engage in games, leagues, competitions or schemes which involve any kind of gift, medals or prize money.