NBFC & Misc NBC (Advt) Rules, 1977

NBFC & Misc NBC (Advt) Rules, 1977

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NBFC & Misc NBC (Advt) Rules, 1977

The Non-Banking Financial Companies (NBFC) and Miscellaneous Non-Banking Companies (Advt) Rules, 1977, were established under the Companies Act, 1956, in India. Here’s an overview of these regulations, highlighting their purpose, scope, and key provisions:

Overview

  1. Purpose:

    • To regulate the advertisement practices of NBFCs and miscellaneous non-banking companies.
    • To ensure that companies provide accurate information to the public and do not engage in misleading or deceptive advertising.
  2. Scope:

    • The rules apply to all non-banking financial companies and miscellaneous non-banking companies registered under the Companies Act.
    • It encompasses various forms of advertisements, including those related to financial services, products, and investments.

Key Provisions

  1. Definitions:

    • The rules define key terms such as “advertisement,” “company,” “financial company,” etc., to provide clarity on their application.
  2. Advertisement Guidelines:

    • Advertisements must be truthful, not misleading, and not likely to deceive the public.
    • Companies are prohibited from making false statements or claims regarding their financial position or the returns on investments.
  3. Content Requirements:

    • Advertisements must disclose relevant information such as:
      • The name of the company.
      • The nature of the financial services or products being offered.
      • Any risks associated with investments.
      • A disclaimer about the possibility of loss in investments.
  4. Approval and Record Keeping:

    • Advertisements must be approved by the company’s board of directors before dissemination.
    • Companies are required to maintain records of all advertisements published.
  5. Penalties for Non-Compliance:

    • Companies that violate the rules may face penalties, including fines and restrictions on operations.
    • Misleading advertisements can lead to legal action by regulatory authorities.

Important Considerations

  • Regulatory Authority: The Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA) oversee the compliance of these rules.
  • Updates and Amendments: It’s important to keep abreast of any amendments or changes to these rules, as regulations may evolve based on market conditions and regulatory needs.

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