The Securities Exchange Board of India ( SEBI ) has clarified that the research reports by the research analysts do not be considered as advertisements unless they are promotional in nature.
This clarification comes through SEBI Circular no. SEBI/HO/MIRSD/MIRSD-PoD-2/P/CIR/2023/51, dated April 5, 2023, and the Master Circular for Research Analysts dated May 21, 2024. These documents specify the advertisement code provisions to be adhered to by RAs in their communications.
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SEBI received several queries concerning the applicability of advertisement code provisions to research reports issued by RAs. In response, it clarified that unless a research report contains promotional elements related to the products or services offered by an RA, it will not be treated as an advertisement. It has also revised paragraph 8.1 a. ii. of the Master Circular issued on May 21, 2024.
The revised para 8.1 (a)(ii) states as follows :
“The forms of communications, to which the advertisement code shall be applicable, shall include pamphlets, circulars, brochures, notices or any other literature, document, information or material published, or designed for use in any publication or displays (such as newspaper, magazine, sign boards/hoardings at any location), in any electronic, wired or wireless communication (such as electronic mail, text messaging, messaging platforms, social media platforms, radio, telephone, or in any other form over the internet) or over any other audio-visual form of communication (such as television, tape recording, video tape recordings, motion pictures) or in any other manner whatsoever.
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Further, a research report, irrespective of the mode of its dissemination to any investor or prospective investor, shall be construed as an advertisement if anything contained in the said research report is either expressly or impliedly in the nature of promotion of products or services offered by an RA.”
The updated provision emphasises that a research report, regardless of how it is shared with investors, will only be classified as an advertisement if it contains content that promotes the RA’s products or services, either explicitly or implicitly.
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This circular has been issued under Section 11(1) of Chapter IV of the SEBI Act, 1992, and Regulation 24(2) of the SEBI (Research Analysts) Regulations, 2014, with the aim of protecting investor interests, promoting market development, and regulating the securities market effectively.
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