SEBI cracks down on those promising risk-free returns, ban on use of difficult words

The Securities and Exchange Board of India had directed investors not to make fixed returns regarding mutual funds. Now a month after this directive, SEBI has come up with an advertisement code for investment advisors and analysts. SEBI has introduced a new code of conduct to crack down on such people. 

Under the new code of conduct, advisors and analysts have been barred from promising or guaranteeing fixed and risk-free returns to investors. Now these organizations will not be able to claim themselves to be the best, number one, top advisor or analyst and market leader. SEBI took this decision keeping in view the safety of the investors. 

SEBI permission will be required 

Market advisors and institutions have to take SEBI’s approval before giving advice on any fund or stock. If advice is given without permission then regulatory can take major action. SEBI has also issued a circular regarding this. 

What did SEBI say about such advertisements 

SEBI said in its circular that no advertisement can tell assured return or minimum return or target, which gives an impression to investors that investment advice or research report is risk-free. Also, no ad can give this information that how much return you will get. 

Prohibition on speculative statements 

The regulatory board has prohibited the extensive use of technical or legal terminology or complex language and the inclusion of excessive information that may mislead investors. The regulator has also said in its statement on Wednesday that estimates and misleading have also been banned. 

Where does this ad code apply 

This advertisement code will be applicable on pamphlets, circulars, brochures, notices, research reports, documents, information or any other things. In addition, the same shall apply to the use in any publication or display by any electronic, wired or wireless. This circular will be effective from May 1. 

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