Standard warning in mutual fund advertisements to run for at least 5 seconds

SEBI vide circular SEBI/IMD/CIR No. 17/ 193751/2010 dated February 04, 2010 has directed Asset Management Companies (AMCs) to ensure that the standard warning in mutual fund advertisements (audio visual) runs for at least 5 seconds. As per the current regulation, in advertisements through audio-visual media like television, a statement “Mutual Fund investments are subject to market risks, read the offer document carefully before investing” is required to be displayed on the screen for at least 5 seconds and should be accompanied by a voice over reiteration. SEBI observed that in some cases the visual and voice over were run for less than 5 seconds, or if the visual stayed for 5 seconds the voice over either started late or ended early or both. SEBI has now changed the standard warning to "Mutual Fund investments are subject to market risks, read all scheme related documents carefully". SEBI re-emphasized that both the visual and the voice over of the standard warning will be run for at least 5 seconds. SEBI has also mandated that no addition or deletion of words should be made in the standard warning.

In June 2009, SEBI had issued a show cause notice against Reliance mutual fund in relation to a possible violation of this rule. In its order SEBI had pointed out that “The rapid fire manner in which the standard warning “Mutual Fund investments are subject to market risks, please read the scheme information document carefully before investing” as recited in the audio visual renders it unintelligible. This leads to a situation where the investors are not able to take well informed investment decisions.” SEBI also noted that this amounts to a “serious violation”.

Two weeks back, SEBI had directed all AMCs to print in bold, the various disclosures under the Advertisement Code (covered in this blog here).

A copy of the circular is available here.