Sebi may allow celebrities to endorse mutual fund business

MUMBAI: Very soon, you may see Amitabh Bachchan, Sachin Tendulkar, M S Dhoni or Virat Kohli promoting investments in mutual funds.

In a dramatic shift in its strategy to boost mutual fund investments in the country, markets regulator Sebi is seriously considering the option of allowing celebrity endorsement for the fund industry as a whole under trade body AMFI, a top Sebi official said. However, the regulator will not allow brand ambassadors for individual fund houses.

After a recent meeting between Sebi officials and top executives from mutual fund houses, the proposal to allow the industry to use celebrities was forwarded to the Sebi chairman.

Following that, top officials within the regulatory body are looking into the idea, which could give a big boost to the expansion of mutual funds, three industry players told TOI.

Currently, with the main objective of protecting investors from mis-selling, the market regulator does not allow celebrity endorsement of individual mutual fund products. On the other hand, IRDAI, the regulator for the insurance industry, does not have any such rule and allows insurance companies to use brand ambassadors.

In case Sebi agrees with the MF houses on celebrity endorsement, the industry trade body AMFI will become the nodal agency. "From this fiscal, AMFI will have an extra corpus of about Rs 120-130 crore to spend on investor education. A part of the corpus could be used for getting a celebrity," said a top Sebi official.

The regulator allows fund houses to charge 2 paise for every Rs 100 invested by mutual fund investors for financial literacy and investor education. Till last fiscal, fund houses had the liberty to spend this money. However, from this fiscal, of the 2 paise, 1 paise will be transferred to AMFI for creating an investor education fund for the entire industry. Each fund house can spend the balance as they wish.

According to a top mutual fund executive with long experience in advertisement and marketing, if Sebi allows fund houses to use a celebrity as an industry brand ambassador, the person should be one who would be able to instil confidence among investors that their money is in safe hands. "The person should be able to give investors the confidence to park their money in mutual funds for the long term. In the current scenario, finding such a person could be a challenge for us," the fund industry official said.

In addition to allowing a brand ambassador for the entire industry, Sebi and the MF players are also engaged in changing the advertisement code for fund houses for digital and social media, sources said.

The current advertisement code for the mutual fund industry was first put in place in 2000 and has only seen some intermittent changes. Given the fact that a substantial part of the advertisement budget for most advertisers is aimed at digital media, industry players are looking at a major overhaul of the code.