SEBI Common Advertisement Code: Finfluencers Still Lack Direct Oversight

• SEBI's approved and notified Common Advertisement Code (CAC), introduced in a June 23, 2026 consultation paper, aims to consolidate advertising rules for seven types of regulated intermediaries, and is set to come into force in April 2027.
• The CAC shifts from mandatory prior approval to post-issuance reporting within 24 hours for advertisements by regulated entities.
• For the first time, Indian securities law under CAC introduces a quantitative threshold for online reach, defining "celebrity" to include influencers with over 5 lakh followers.
• Despite these changes, the CAC's framework primarily regulates registered entities, leaving unaffiliated financial influencers largely outside direct regulatory obligations.
• Regulation 16-A, added in August 2024, indirectly addresses finfluencers by prohibiting regulated entities from associating with those offering unregistered advice or making unlawful claims, even in unpaid arrangements.

This framework creates a significant asymmetry in investor protection, as direct regulatory obligations largely bypass unaffiliated financial influencers, despite their considerable influence on investment decisions.

The Securities and Exchange Board of India (SEBI) has approved and notified a Common Advertisement Code (CAC) designed to streamline and consolidate advertising regulations for its supervised intermediaries. The Common Advertisement Code, detailed in a consultation paper issued on June 23, 2026, has been notified as amendments to the existing SEBI (Intermediaries) Regulations, 2008, and is set to come into force in April 2027. The CAC aims to unify the advertising obligations across seven distinct categories of regulated entities, which include stock brokers, mutual funds, and depository participants, among others.

A notable shift introduced by the CAC is the move away from mandatory prior approval for advertisements. Instead, regulated entities would be required to report their advertisements post-issuance, specifically within a 24-hour window. Furthermore, the proposed code marks a significant development in Indian securities law by, for the first time, establishing a quantitative threshold for online reach. While not directly defining a "financial influencer," the CAC introduces a definition for "celebrity," which encompasses an individual influencer possessing more than five lakh followers or subscribers on a single social media platform. This definition activates specific regulatory requirements for regulated entities engaging such individuals.

Despite the advancements in the proposed Common Advertisement Code, a persistent limitation identified since 2024 continues to affect SEBI's regulatory framework: the direct imposition of obligations remains contingent upon the involvement of a registered entity. This structural characteristic means that unaffiliated financial influencers, often referred to as finfluencers, largely operate outside the direct scope of these new regulatory requirements, creating a significant asymmetry in investor protection.

This framework creates a significant asymmetry in investor protection, as direct regulatory obligations largely bypass unaffiliated financial influencers, despite their considerable influence on investment decisions. While the segment of the financial promotion market involving registered entities is subject to stringent regulation, unregistered finfluencers, who may command greater sway over investor choices, are primarily addressed through a more ad-hoc, case-by-case enforcement approach. This disparity highlights a gap where a substantial portion of financial promotion activity remains beyond the direct purview of comprehensive regulatory oversight.

The foundational principle of the CAC's substantive provisions rests on its definition of "advertisement" in clause (1), which broadly covers communications made directly or indirectly by or on behalf of a regulated entity for promoting its goods, services, or brand. When a regulated entity engages a "celebrity" as defined by the CAC, specific requirements are triggered, including prior approval under clause (6)(ii) and the 24-hour post-issuance reporting duty. Additionally, clause 10 imposes strict limitations on advertisement content, prohibiting testimonials, assured or indicative returns, suggestions of recurring past performance, and rankings not issued by a certified Risk and Return Verification Agency.

This design mirrors the approach taken in Regulation 16-A of the Intermediaries Regulations, which was introduced on August 29, 2024, and subsequently elaborated upon through SEBI circulars on October 22, 2024, and January 29, 2025. Regulation 16-A does not impose direct affirmative compliance obligations on unregistered creators. Instead, it focuses on regulating the association between a regulated entity and such individuals. It explicitly prohibits regulated entities from collaborating with persons who provide unregistered advice or make unlawful claims regarding performance or returns. The definition of "association" is broad, encompassing the exchange of money or its equivalent, client referrals, the integration of information technology systems, and any other similar arrangement, notably including unpaid collaborations. In this regulatory model, the registered entity remains the primary subject of regulation, with finfluencers being addressed indirectly through their interactions with these regulated entities.

The current regulatory landscape, characterized by its entity-centric approach, presents challenges for comprehensive investor protection, particularly concerning the widespread influence of unregistered financial influencers. The existing framework, while robust for regulated entities, creates a potential for distortion due to a single-sided disclosure mechanism that can disadvantage compliance efforts.

To address these concerns and enhance investor protection in India, potential reforms have been suggested. These include implementing more stringent disclosure requirements, leveraging digital platforms for better oversight, and establishing public endorsement registers. Such recalibrations, if adopted within SEBI's existing powers, could help bridge the regulatory gap and foster a more equitable and transparent environment for financial promotion.

Lawyers advising SEBI-regulated entities must scrutinize their clients' advertising practices and any collaborations with financial influencers to ensure compliance with the proposed Common Advertisement Code and existing Regulation 16-A, particularly regarding disclosure and reporting obligations. Compliance officers should be aware that while their entities face strict regulation, the enforcement landscape for unregistered finfluencers remains more ad-hoc, creating potential reputational and regulatory risks through association.

Source: Original reporting via legal analysis of SEBI proposals