The Securities and Exchange Board of India (SEBI) has suggested that no prominent personalities, or public figures including celebrities from the field of entertainment or sports, should endorse crypto products and the discloser should inform audiences about the violation of laws.
A recent report by The Hindu Businessline revealed the recent development when SEBI shared its point of view to the Parliamentary Standing Committee on Finance when members questioned officials about the growing crypto industry which is yet to be regulated by the Ministry.
Crypto is named virtual digital assets (VDA) for taxation purposes. The digital asset is legitimised for a 30% tax plus 1% TDS for crypto transfers.
The regulator has submitted a detailed response in writing. SEBI has also been asked to give its views on the advertisement of this cohort and also keep in mind the existing guidelines by the Advertising Standards Council of India (ASCI), a source told The Hindu Businessline.
“Given that crypto product is unregulated, prominent public figures including celebrities, sportsmen, etc. or their voice shall not be used for endorsement/advertisement of crypto products,” a source told The Hindu Businessline quoting SEBI’s response. Further, it mentioned that the prominent public figure shall be held responsible for making an 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.
The Consumer Protection Act 2019, states the onus of due-diligence on the celebrities for claims in all ads. If the advertisement is found to be faulty and misleading, the CCPA (Central Consumer Protection Authority) has the authority to issue instructions to discontinue the ad or to get it changed.
The CCPA can also levy a penalty of up to Rs 10 lakh on the celebrity endorser for a false or misleading ad in the first instance and penalties can go up for Rs 50 lakh for repeated 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 the prevention of misleading advertisements under the Consumer Protection Act.