In a significant step to safeguard retail investors, the Securities and Exchange Board of India (SEBI) has released a consultation paper outlining a revised Advertisement Code for Online Bond Platform Providers (OBPPs). This initiative comes amidst growing concerns over aggressive marketing strategies, including the use of social media influencers and behavioral prompts like 'fear-of-missing-out' (FOMO), which have led to investors making hurried financial commitments without adequate due diligence.
Why New Rules Are Needed
The online bond market has seen substantial growth in investor participation, but this expansion has been accompanied by a shift towards promotional tactics that often imply guaranteed or exceptionally high returns. SEBI noted that many OBPPs leverage online banner campaigns and financial influencers to market high-yield and structured bond products, sometimes employing urgency-driven messaging that can be deceptive.
The regulator has received multiple representations seeking clarity on debt terminology and complaints regarding misleading marketing. In response, SEBI's Corporate Bonds and Securitisation Advisory Committee (CoBoSAC) evaluated the market landscape and recommended a specialized code tailored to debt securities, building upon a broader Common Advertisement Code under development for all regulated entities.
Key Proposed Changes to SEBI Bond Ad Code
The proposed framework introduces several mandatory requirements and outright prohibitions designed to enhance transparency and investor protection:
- Mandatory Disclosures: Advertisements for debt securities on OBPPs must explicitly detail the Issuer's Name, Tenor, Nature of Security (Secured or Unsecured), Clean Price and Dirty Price, Yield to Maturity (YTM), Credit Risk-o-meter, and comprehensive Credit Rating Details, including rating changes and direct references to the rating rationale.
- Clarifying "Fixed Returns": While terms like "fixed returns," "returns are predictable," or "passive income" will be permitted due to the inherent nature of fixed-income products, they must be used generically and non-promissory. Any such claims must be backed by explicit calculation methods and clear risk disclosures, without implying guaranteed yields.
- Standardized Disclaimers: Advertisements displaying a range of fixed returns must include an asterisked disclaimer reflecting platform inventory on that date, presented in a uniform font size without undue prominence to higher yields.
Mandatory Warning & Blanket Prohibitions
To ensure complete clarity on investment risks, SEBI has formulated a mandatory standard warning that must be displayed prominently in a legible font size of at least 10 points across all promotional material:
"Fixed returns are not guaranteed returns. Investments in debt securities are subject to market, credit and default risks. Read all offer related documents carefully."
This warning cannot be altered, and for regional language advertisements, it must be faithfully translated. Audio-visual media must feature clear visual text and audible voiceover reiterations.
Crucially, the draft rules impose strict prohibitions on subjective marketing jargon. Vague adjectives such as "high yield," "high rated," and "high returns," or any ungrounded synonyms, are outright banned. Celebrities remain barred from endorsing bond platform products. Additionally, OBPPs are prohibited from advertising their own holdings or inventory in any debt security or ISIN within promotional materials.
Rules for Market-Linked Debentures (MLDs)
Advertisements concerning Principal Protected Market Linked Debentures (MLDs) cannot imply assured or guaranteed returns. They must carry adequate risk disclosures regarding the underlying benchmark and a specific disclaimer: "Principal Protected Market Linked Debentures do not offer fixed or assured returns. Payouts depend on the underlying benchmark performance."
Public Feedback Invited
SEBI has invited public feedback, suggestions, and counter-proposals on the draft circular. Market participants and investors can submit their comments through SEBI's web-based public comment portal until September 11.