Advertisement & Sales Literature Guidelines
SEBI's advertisement code governs every communication issued by or for a fund house. This lesson explains what an advertisement must carry, what it may not contain and the standard form in which performance is shown.
Why advertisements are regulated
An advertisement is often the first thing a person sees about a scheme, and a selective one can make a market-linked product look certain. SEBI's advertisement code therefore covers any communication issued by or for a fund house, in any medium.
The starting rule is that an advertisement must be accurate and fair. It must not be false or misleading, and it must not promise or guarantee returns, even by implication.
What every advertisement carries
Every advertisement carries the standard warning in its prescribed words, without any change: 'Mutual Fund investments are subject to market risks, read all scheme related documents carefully'.
Showing a scheme's benchmark and its riskometer level is ordinary disclosure; the riskometer has six levels, from Low to Very High. The code does not require the day's NAV, the fund manager's photograph or a comparison with deposit rates.
What is barred
An advertisement may not use celebrities or testimonials, and it may not carry rankings based on any criteria. Older material that says star ratings or rankings may be shown with a disclaimer is out of date.
No indicative yield or return may be offered. A line such as 'guaranteed returns with no risk' breaches the code, because mutual fund units are market-linked.
How performance is shown
Where performance is shown, it follows a standard form so that schemes can be compared on the same basis. A scheme more than a year old shows compound annual growth rate (CAGR) for 1, 3 and 5 years and since inception, plus point-to-point returns on ₹10,000.
A scheme 6 to 12 months old shows simple annualised growth, and a scheme under 6 months old shows no performance at all. Past performance may or may not be sustained in future and is not a guarantee.
Distributors must follow SEBI and AMFI advertising rules in every medium, including social media.
Rules at a glance
Two draft advertisements (illustrative)
A fund house's marketing team prepares two drafts for an equity scheme that is six years old. Draft one shows a film actor, a quote from a satisfied investor and a badge saying the scheme is ranked first in its category. It fails on three counts: celebrities, testimonials and rankings are all barred.
Draft two shows CAGR for 1, 3 and 5 years and since inception with the value of ₹10,000 invested, the benchmark, the riskometer level and the standard warning in its prescribed words. That is consistent with the code.
CAGR, point-to-point and simple annualised growth (illustrative)
- Assumptions for the arithmetic only, not an indication of any return: Scheme A's NAV moved from ₹20.00 to ₹26.62 over exactly 3 years. Scheme B is 9 months old and its NAV moved from ₹10.00 to ₹10.60.
- Scheme A growth multiple = 26.62 ÷ 20.00 = 1.331.
- CAGR = cube root of 1.331, minus 1 = 1.10 − 1 = 10% a year (check: 1.10 × 1.10 × 1.10 = 1.331).
- Point-to-point on ₹10,000 = ₹10,000 × 1.331 = ₹13,310.
- Scheme B growth = (10.60 − 10.00) ÷ 10.00 = 6% in 9 months; simple annualised growth = 6% × 12 ÷ 9 = 8%.
Result. Scheme A is shown with a 3-year CAGR of 10% and ₹10,000 having become ₹13,310; Scheme B is shown with simple annualised growth of 8% and no CAGR.
Key points
- An advertisement must not be false or misleading and must not promise or guarantee returns, even by implication.
- Every advertisement carries the standard warning in the prescribed words.
- Celebrities, testimonials and rankings on any criteria are barred, and no indicative yield or return may be offered.
- Performance is shown as CAGR for 1, 3 and 5 years and since inception, plus point-to-point returns on ₹10,000.
- Schemes 6 to 12 months old show simple annualised growth; schemes under 6 months old show no performance.
Common misunderstandings
- A disclaimer does not make a ranking or star rating permissible: rankings on any criteria are barred.
- The standard warning cannot be reworded or shortened: it appears in the prescribed words.
- The code is not limited to fund houses or to print and television: distributors follow it in every medium, including social media.
Questions people ask
May an advertisement say what a scheme is likely to earn?
No. No indicative yield or return may be offered, and returns may not be promised or guaranteed, even by implication.
What does point-to-point return on ₹10,000 show?
What ₹10,000 invested at the start of the period had become at its end. It is shown along with the CAGR.
May an advertisement show the benchmark and riskometer?
Yes. Showing a scheme's benchmark and its riskometer level is ordinary disclosure and consistent with the code.
What this lesson relies on
- SEBI (Mutual Funds) Regulations, 2026 and SEBI Master Circular for Mutual Funds (20 March 2026) — advertisement code and disclosure of performance
- AMFI code of conduct for mutual fund distributors (AMFI Master Circular for Mutual Fund Distributors)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.