The Securities and Exchange Board of India (SEBI) has suggested that no ‘prominent public figures, including celebrities, sportsmen’ should endorse crypto products and the advertisement discloser should also talk about possible violation of laws, reports Business Line.
As on date, crypto is not regulated and has been named as virtual digital assets (VDA) for taxation purpose only.
SEBI communicated its view to the Parliamentary Standing Committee on Finance when members quizzed officials on various aspects of crypto last month, sources told Business Line.
Now, the regulator has submitted a detailed response in writing. The Finance Ministry has also asked the regulator to give its views on advertisement and also forwarded guidelines by Advertising Standards Council of India (ASCI), sources added.
Violation of law?
“Given that crypto products are unregulated, prominent public figures including celebrities, sportsmen, etc. or their voice shall not be used for endorsement/advertisement of crypto products,” a source quoted SEBI’s response.
Further, it mentioned that the prominent public figure shall be held responsible for making endorsement which is a possible violation of the Consumer Protection Act or any other law.
The source also said SEBI suggested rewording of disclaimer provided by ASCI by adding “dealings in crypto products may lead to prosecution for possible violation of Indian laws such as FEMA, BUDS Act, PMLA, etc,” after talking about risk and no legal recourse available for fraud, wrote Business Line.
‘Impeding right to earn’
“A complete ban on advertising a specific category is one thing. But if it there is no ban on advertising the product, then determining who can endorse that product or not is just not debatable,” said Lloyd Mathias, Business Strategist and Independent Director.
He added that this can also impede any public personality’s fundamental right to earn.
Last November, amid crowding of crypto ads featuring celebrities, Prime Minister Narendra Modi had chaired a meeting and it was strongly felt that attempts to mislead the youth through over-promising and non-transparent advertising be stopped.
After that, the ASCI consulted with different stakeholders, including the government and the VDA industry to frame guidelines for advertising and linked services. These were released in February and came into effect on April 1.
“Since this is a risky category (VDAs), celebrities or prominent personalities who appear in such advertisements must take special care to ensure that they have done their due diligence about the statements and claims made in the advertisement, so as not to mislead consumers,” the guidelines stated.
Penalty for misleading ads
The Consumer Protection Act, 2019, also puts the onus of due-diligence on the celebrities for claims in all ads.
If an advertisement is found to be false or misleading, the Central Consumer Protection Authority can issue directions to discontinue or modify the ad to the concerned manufacturer or celebrity endorsers of the product.
The CCPA can also levy a penalty of up to ₹10 lakh on the celebrity endorser for a false or misleading ad in the first instance and penalties can go up for ₹50 lakh for any further instances of false and misleading claims in ads.
It can also prohibit celebrities from endorsing any other products for up to three years.
However, it adds, “No endorser shall be liable to a penalty if he/she has exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by him/her.”
The Consumer Affairs Ministry is also expected to soon finalise the guidelines for prevention of misleading advertisements under the Consumer Protection Act.