Vindicating the stand taken by Moneylife Foundation, the ministry of corporate affairs has warned people against celebrity endorsements and misleading claims in financial products
The Ministry of Corporate Affairs (MCA) has vindicated the stand taken by Moneylife Foundation against celebrity endorsement and misleading claims made in advertisements related with financial products. Through an advertisement aired on radio, the MCA is urging consumers not to believe in celebrity endorsements. It also advises companies not to waste money based on celebrity endorsements and advertisements.
Four years ago, Moneylife Foundation had petitioned against celebrities endorsing financial products because they were complex and not like colas or consumer product.
An official from the MCA told the Economic Times that “The advertisement is part of a 
larger campaign to educate investors. It is not just celebrity endorsements that we are targeting. The ministry is likely to do more such advertisements through the year so that investors don't get swayed by misleading TV commercials.”
The MCA advertisement, which airs on All India Radio (AIR) FM channel, is conversation between friends. It explains that, how a company that is spending a lot of investors’ money on endorsements that cannot give higher returns and one should be careful before investing in such company.
Monylife Foundation Trustee Sucheta Dalal, while talking at interactive session on how to hold irresponsible advertisers accountable, emphasised that there is a need for a common code that brings banks and insurance companies on par with mutual funds. “While toxic insurance products were sold to the gullible investors nothing is being done to stop false advertisements. Since the banking regulator has no rule on misleading advertisements, banks too can get away by mis-leading consumers by showing a higher return,” she said.
The Securities & Exchange Board of India (SEBI) is the only regulator to fix the problem of mis-selling of mutual funds. However, Insurance Regulatory and Development Authority (IRDA) and Reserve Bank of India (RBI) are still asleep on celebrity endorsement of financial products. SEBI said, mis-selling is not restricted to false statements, but can also happen by ‘concealing or omitting material facts’ or ‘concealing associated risks’ and not taking care to ensure ‘suitability of the scheme to the buyer’.
SEBI has stringent rules for initial public offering (IPO) ads as well as mutual funds. As we all hear, "Mutual fund investments are subject to market risks, read the offer document carefully before investing”. SEBI had asked the advertised to slow down its speed from the fast one. It also mandated companies to use fixed and readable size for fonts used in disclaimers. SEBI insist that the disclaimer should be displayed for minimum six seconds and must be coherent and comprehensible as per its regulation.
Celebrity endorsing shampoo and soaps is far different than celebrity endorsing mutual fund or any financial products. Especially when the celebrity is not fully aware of the financial product he/she is endorsing and makes tall claims about it. We come across many advertisements including Amitabh Bachchan, Irfan Khan and Sachin Tendulker selling insurance policy and child plans.
All advertisements were so appealing and made financial products seem simple, safe & so- easy to buy, but the reality is far different than what they show. The celebrity Actor Irfan Khan saying ‘Kum Inusrance lene ki bimari’ while endorsing Aegon Religare Insurance is the same company having maximum rejection of claims. Moneylife Earlier wrote about, Aegon Religare: ‘Kum’ insurance ‘dene ki bimari’.
The 71-year-old Bollywood mega star, Amitabh Bachchan in one famous commercial advertisement claims buying an insurance policy is two minutes task like cooking two minute noodle, which is also endorsed by him. However, as we all know the reality is buying Insurance policy requires a lot of time and in-depth research.
Recently, the super star said that “his conscience had made him stop endorsing Pepsi after a school girl in Jaipur asked him why he promoted the soft drink that her teacher branded as poison.”
He stated this while addressing an interactive session on celebrity endorsements at the Indian Institute of Management, Ahmedabad (IIM-A) according to the report.
Last week, The Central Consumer Protection Council (CCPC) under the chairmanship of minister, KV Thomas set up a sub-committee to draft guidelines to safeguard consumer interest from false advertisements in the country. According to reports from Times of India, The panel discussed the tall claims made by advertisers and the need for celebrities endorsing products to be liable for misleading advertisements.
As per The Companies Act, 2013, “Any person who makes a promise or forecast that is false shall be punishable with jail of six months, extending up to 10 years.” While earlier under the Companies Act, 1956, punishment for such an offence was limited to a fine.
However, to punish a celebrity endorser, it has to be proved that whether celebrity person made the representation "recklessly", without ascertaining the facts, or he was aware that the statement was false or misleading.
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BTW if he really believes in the product he endorses, is the same applicable to Aadhar?