Regulating the Regulated: SEBI’s Advertisement Code and the Limits of the Register

This article critically examines SEBI’s proposed Common Advertisement Code (CAC) for regulated intermediaries, highlighting how its registration-based framework leaves unaffiliated financial influencers largely outside direct regulatory obligations. It explores the resulting asymmetry in investor protection and proposes targeted reforms involving disclosure requirements, digital platforms and public endorsement registers.

Introduction

SEBI issued a consultation paper on 23 June 2026, proposing a Common Advertisement Code (CAC)¹ for inserting specified regulated entities as a chapter in the SEBI (Intermediaries) Regulations, 2008. The paper combines the advertising obligations of seven regulated intermediaries, ranging from stock brokers and depository participants to mutual funds, and eases out the compulsory prior approval in favour of post-issuance reporting within twenty-four hours. One of the most remarkable points of CAC is that the Indian securities law, for the first time, attaches a quantitative threshold to online reach though it does so not by defining “influencer”, but by defining “celebrity”, one limb of which covers an influencer with more than five lakh followers or subscribers per social media handle.

In this blog, we critique that although CAC has improved upon its previous framework, it ended up reproducing a limitation that SEBI has juggled with since 2024, i.e. every obligation it imposes is contingent upon the involvement of a registered entity. It leads to twofold consequences, whereby the visible part of the market for financial promotion is heavily regulated; however, the unregistered finfluencer, who perhaps commands greater influence over investors’ decisions, remains tested only through case-by-case enforcement.² This blog is divided into four parts: Part I lays down the entity-centric structure of the perimeter, and Part II identifies what falls outside its ambit. Part III argues that the resulting asymmetry is not just a gap but a distortion, since single-sided disclosure mechanism mandates operate as a handicap on compliance. Lastly, Part IV recommends three recalibrations available within SEBI’s ambit.

A criteria shaped like a register

The definition of “advertisement” in clause (1)³, which includes communications made, directly or indirectly, by or on behalf of a regulated entity in connection with, or having the primary impact of, promoting its goods, services, or brand, provides the foundation for all substantive provisions of the CAC. When a regulated entity hires a celebrity, the prior approval requirement under clause (6)(ii)⁴ is activated, and the entity’s ads are subject to the 24-hour reporting duty. What the entity may say or obtain to be stated is limited by the limitations in Clause 10⁵ on testimonials, assured or indicative returns, content suggesting that prior performance may recur, and rankings not assigned by a prior Risk and Return Verification Agency.⁶

This is a purposeful design decision rather than a drafting error, and it is similar to Regulation 16-A of the Intermediaries Regulations, which was added on 29 August 2024⁷, and further developed by SEBI in its Circulars dated 22 October 2024, and 29 January 2025.⁸ Regulation 16-A does not subject the unregistered creator to the same affirmative compliance obligations imposed on the regulated entity; rather, it regulates the regulated entity’s association with such a person. It forbids regulated individuals from collaborating with those who offer unregistered advice or make unlawful claims of performance or return. Association is defined to include the exchange of money or money’s worth, client referrals, the interaction of information technology systems, and any other association of a similar nature or character. The definition does not turn on consideration, an arrangement does not exit Regulation 16-A merely because it is unpaid. Throughout, the registered entity serves as the regulatory subject, and the finfluencer is indirectly addressed by severing the entity’s channels of association.

Two tracks inside a single regulation derive from the CAC’s proposed placement within the same document. The first track controls what a registered entity can say about itself, while the second controls who may speak or act on its behalf. The proposed definition of advertisement likewise requires no consideration, reaching any communication issued directly or indirectly, by or on behalf of, a regulated entity. Both end at the edge of SEBI’s registers and are anchored to the same point of control.

The category that remains

Outside of that line are three categories of behaviour. The first is impersonation, in which a third party uses the name of an organisation without permission. In response, clause (7)(ix)⁹ mandates that the entity take action within seven days of learning about it, notify its supervisory body, and then identify the third party on its website. This privatised enforcement only applies in situations when the entity’s own brand has been usurped.

The unaffiliated promoter is the second and far larger class. A creator has no affiliation with any regulated firm under Regulation 16-A and issues nothing on behalf of one under clause (1) if they evaluate brokerage platforms, rank schemes, publish profit-and-loss screenshots, and make money through advertising, course fees, or subscriptions. Neither track is relevant; only the general law, Section 12(1), SEBI Act¹⁰, if the behaviour amounts to unregistered advisory or research activity, and the PFUTP Regulations¹¹, if it is fraudulent, apply to such a person. The proceedings against Avadhut Sathe Trading Academy (P) Ltd., In re¹² show that SEBI ordered the impounding of more than Rs 546 crores in December 2025, and while the Securities Appellate Tribunal modified this on 22 January 2026 to require a Rs 100 crore deposit with a lien in SEBI’s favour, it simultaneously upheld SEBI’s prima facie findings of IA/RA Regulations violations and made trading restrictions conditional on that deposit. This illustrates that even a partial, appeal-modified enforcement action demands ex parte orders, search-and-seizure operations, and a full SAT appeal before resolution, underscoring the heavy cost of relying solely on enforcement after harm has already occurred. However, enforcement of this type only happens when the amounts involved warrant the cost of the investigation, one respondent at a time, and after the harm has been done.

Two carve outs interact to form the third class. Subject to the requirements of clause (5)(a)¹³ that branding be “minimal and incidental” and that no promotional call to action be included, the CAC excludes content that is solely instructional. The restriction on pricing data that is less than three months old qualifies the appropriate exception for investor education found in Regulation 16-A. The second will typically be satisfied by content designed to fulfil the first. The paper characterises its carve out as a bright line test based on the lack of product promotion, a description SEBI itself adopts in its rationale. The operative provision, however, is not perfectly bright-line, although the absence of product promotion supplies the organising principle, the conditions attached to it leave questions of degree, particularly what constitutes “minimal and incidental” branding and what amounts to an attempt to influence a purchase decision that will be contested at the margin.

The disadvantage of asymmetric disclosure

One could argue that the CAC does not claim to address this acknowledged issue. For two reasons, the criticism understates the position.

Substitution is the first. The CAC increases the cost of the compliant channel in ways that are individually justifiable but collectively substantial, reporting all issued advertisements within twenty-four hours the prior approval for any endorser exceeding the five lakh threshold, sourcing and dating statistical claims and confining the use of ratings and rankings to those assigned by a PaRRVA [Past Risk and Return Verification Agency, is a SEBI-backed framework that independently verifies the past performance claims of investment advisors, research analysts, and trading service providers to enhance transparency and investor protection]¹⁴, and then only subject to further conditions.

The second relates to the reasoning behind disclosure. The foundation of the CAC’s investor protection architecture is obligatory signalling, which includes registration numbers, required disclaimers, the assertion that a ranking is simply one criterion among several, and the ban on testimonials. These tools make the assumption that the investor sees the disclosure and makes the necessary adjustments. However, advertisements from regulated entities are not seen in a vacuum.

It shows up in a stream next to content from an unaffiliated creator that doesn’t have any of these indicators: no registration number, no risk disclaimer, no ban on testimonials, or any indication that previous performance will be repeated. Disclosure requirements function by making a disclosed characteristic stand out from a concealed one. The mandate inverts and becomes a burden on the regulated participant and a credibility premium for the unregulated one when only one side of the market carries the requirement. This led to the CAC widening.

Recalibrating the perimeter

A financial commentary licensing system is not the solution. A registration requirement that applies to everyone who publicly discusses securities would be unenforceable in any case and would amount to a prior limitation on speech protected by Article 19(1)(a)¹⁵. There are three more focused metrics.

First, behaviour rather than involvement may be the cause of duties. A restricted portion of the CAC disclosure of registration status and the ban on promised return claims based on Sections 11(1)¹⁶ and 11-B¹⁷ rather than the registration hook may apply to anybody who advertises securities or securities services for consideration, regardless of the source. This governs the promotional act rather than the speaker’s identity.

Second, the practical leverage is found in the “specified digital platform” concept. The concept was built into Regulation 16-A from its introduction in August 2024, discussed in the Circular dated 22 October 2024, and taken up in SEBI’s consultation paper on the recognition of specified digital platforms¹⁸, but it remains mainly undeveloped. Its promise however, depends on a distinction. As an intermediary in the distribution chain, a platform that monetises financial material is in a far better position than SEBI to verify a registration number at the time of upload, and the requirements for its recognition may include labelling requirements for unregistered financial content. As a regulator of speech, the platform is a far more problematic instrument. The verification obligation should therefore attach only to content that constitutes

Third, if the prior approval requirement for endorsers above the five-lakh threshold survives into the final regulation, the approvals should be public. As proposed, the disclosure runs one way the entity reports to SEBI, and the investor sees nothing. A public registry would turn that compliance expense into an investor facing signal, and its value lies as much in absence as in presence, an endorsement that cannot be found on the register is itself information, letting the investor discern between the supervised and unsupervised channel without any extension of the perimeter.

Conclusion

The move to post-issuance reporting is a reasonable acknowledgement of how digital promotion truly works, and the CAC is a welcome consolidation. However, only the visible half of a market has been harmonised by a code that harmonises the responsibilities of seven categories of registered organisations; the remaining half competes for the same attention on significantly simpler conditions.

The fifth consultation question, which asks stakeholders to suggest additional relaxations or improvements to the current framework¹⁹, will almost certainly focus on the compliance burden borne by registered entities. This is a valid concern, but it takes the perimeter as given. The previous question is whether a code that is only addressed to registered entities can achieve the investor protection objective that the paper claims for it when the communications an investor actually encounters originate on both sides of the register and arrive in indistinguishable form.

None of this shows that SEBI has been passive. The Regulation 16-A framework and the enforcement proceedings over the last two years demonstrate a real endeavour to address activity that sits uneasily within the registration-based architecture of the SEBI Act. My submission is narrower: that consolidation ought not to be mistaken for comprehensiveness, and that the six-month transition period contemplated by the paper is an opportunity to attach at least the disclosure-facing elements of the code to the promotional act rather than to the identity of the promoter. The perimeter has been drawn where SEBI’s registers end, which is not where investor harm begins.