By Shilpi Sharan and Vidhi Oberoi
Introduction
The Security and Exchange Board of India (“SEBI”) vide its circular dated April 06, 2023 had observed the usage of brand name/ trade name/ logo by few investment advisers and research analysts following prior publication of a comprehensive set of guidelines for advertisements for investor advisers and research analysts released by the SEBI.
SEBI has released new Rules on the advertisement code for investment advisers and research analysts in order to further enforce the code of conduct for investment advisors and research analysts when they are releasing any advertisement.
Code of conduct for investment advisers and research analysts
The code of conduct for Investment Advisers and Research Analysts have been outlined by below SEBI Regulations:
- Securities and Exchange Board of India (Investment Advisors) Regulations, 2013
- Securities and Exchange Board of India (Research Analysts) Regulations, 2014
However, it has been observed that while marketing their services some investment advisers and research advisers are using their brand names more prominently in their advertisements, websites, publications, correspondences with clients and various documents while marketing their services rather than their name as registered with SEBI.
SEBI has further expressed the concern that usage of the brand name, trade name, or logo may or may not be in relation to the name of the investment advisers or research analysts registered with SEBI which could lead to confusion in the mind of investors and mislead them.
In order to safeguard the interests of investors in the securities market and to encourage its expansion and regulation, SEBI issued this circular in exercise of the authority granted to them by Section 11(1) of the Security and Exchange Board of India Act, 1992.[1]
In furtherance to aforesaid, SEBI has delineated below guidelines to be followed by investment advisers and research analysts in order to ensure transparency while using brand name/ trade name/ logo:
- Display the registered information noticeably
- Provide the information of Compliance Officer and Grievance officer
- Include a disclaimer
- Prohibition on use of SEBI Logo
Investment advisers/ Research analysts must noticeably show their information like the registered name with SEBI, its logo, registration number, and complete address with phone numbers on the website or portal, display board, notice board, publication, advertisement, know your client forms, and client agreements.
Investment advisers/ Research analysts must noticeably display their name as it is registered with SEBI, its logo, registration number, complete address with phone numbers, the name of the compliance officer, his phone number, and his email address, as well as the name, phone number, and email address of the grievance officer or the grievance redressal cell in statements, reports, or any other form of correspondence with the client.
The disclaimer that “Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors” shall be mentioned on portal/web site, if any, notice board, display boards, advertisements, publications, know your client forms, client agreements, statements or reports or any other form of correspondence with the client.
Investment adviser/ research analyst shall not use the SEBI logo.
Conclusion
These Rules will come into effect from May 01, 2023. The circular has been issued by SEBI in pursuance of power conferred to the SEBI under Section 11(1) of the Securities and Exchange Board of India Act, 1992, that gives it the authority to safeguard interests of investors, encourage the growth of the securities market, and regulate the market appropriately.
Tithi Aggarwal, Junior Associate Advocate at S.S. Rana & Co has assisted in the research of this article.
Sources:
- [1] https://www.sebi.gov.in/legal/circulars/apr-2023/usage-of-brand-name-trade-name-by-investment-advisers-ia-and-research-analysts-ra-_69839.html
- For more information: sebi.gov.in
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