(This article was first published in The Economic Times.)

In a board meeting held on 14 January, the Securities and Exchange Board of India (Sebi) made revisions to the advertisement guidelines for the mutual fund industry. There were two primary aspects that the new guidelines were set out for—disclosure of performance information and celebrity endorsements.

Sebi has stated that the performance of mutual funds should now be shown in terms of compounded annual growth rate (CAGR) for the past 1 year, 3 years, 5 years and since inception. The current guidelines allow performance to be displayed in the form of absolute returns for as many 12-month periods as possible in the past 3 years.

The regulator has further asked scheme performances to be based on the last day of the month preceding the date of advertisement, as against the current requirement of using the last day of the quarter-end preceding the advertisement.

Sebi also wants the performance of other schemes managed by the advertised fund’s manager to be disclosed. These measures have been taken to make performance-related information easier to understand and consume by investors.

On the point of celebrity endorsements, Sebi has decided to allow the same on an industry level. This means that celebrities can endorse mutual funds to create awareness about these products and their benefits, but they cannot promote specific mutual fund schemes or fund companies.

Furthermore, ads featuring celebrities will be released only after they have been approved by Sebi.