‘Fixed returns’, ‘high returns’: Sebi proposes tighter bond ad rules

Sebi has proposed stricter advertising norms for online bond platform providers (OBPPs), with a focus on promotional claims that could influence investors to make decisions without adequate due diligence.

The proposed revised advertisement code seeks to address the growing use of digital advertising, social media and influencer-led promotions by online bond platforms, according to a consultation paper issued by the regulator on Friday.

Restrictions on urgency and FOMO messaging

The regulator has proposed restrictions on advertisements using urgency, behavioural prompts and fear-of-missing-out messaging. Such promotions could encourage investors to act without carrying out adequate due diligence, Sebi said.

For advertisements featuring specific securities, OBPPs would also have to provide standardised information. This would include the issuer, tenor, credit rating, nature of the security, clean and dirty prices, yield to maturity and the Credit Risk-o-meter.

Sebi targets ‘fixed returns’ claims

The proposed rules also cover terms such as "fixed returns", "predictable returns" and "passive income". Sebi wants such descriptions to be used in a manner that does not create an impression that returns are assured.

Advertisements using the term "fixed returns" would need to carry a prominent disclaimer stating that fixed returns are not guaranteed and that debt securities are subject to market, credit and default risks.

Rules proposed for high-yield claims

The market regulator has also proposed curbs on vague promotional claims such as "high yield", "high rated" and "high returns" when these claims are not adequately substantiated.

The revised advertisement code would operate alongside a common advertisement code applicable to specified Sebi-regulated entities.

Sebi has invited stakeholders to submit comments on the consultation paper. The deadline for submissions is September 11.