Sebi Proposes New Bond Distribution and Advertising Rules

The Securities and Exchange Board of India has proposed a comprehensive framework to increase retail participation in corporate bonds while protecting investors from mis-selling. The regulator intends to establish a network of fixed-income channel partners (FICPs) to assist investors with onboarding, documentation, and KYC processes, routing these transactions through online bond platform providers (OBPPs). Registered distributors from the Association of Mutual Funds in India may apply as FICPs without paying enlistment fees.

To ensure market integrity, the regulator proposes banning in-kind incentives for FICPs and requiring OBPPs to implement strict due diligence and training. A revised advertisement code specifically targets influencer-led promotions and digital advertising. The proposal seeks to restrict behavioral tactics such as artificial scarcity and "fear-of-missing-out" (FOMO) messaging that might lead investors to bypass due diligence.

Under the proposed rules, platforms using terms like "fixed returns," "predictable returns," or "passive income" must include prominent disclaimers stating that returns are not guaranteed and are subject to market, credit, and default risks. The regulator also intends to prohibit vague promotional terms like "high yield" and require the disclosure of standardized data, including credit ratings, yields, tenor, and the Credit Risk-o-meter. These proposals are open for public and stakeholder feedback until September 11.