Focus: ASIC issues guidance for the promotion and advertising of financial products and services
27 February 2012
In brief: ASIC has released guidance to assist promoters of financial products and services, as well as publishers of advertising for such promotions, in complying with their legal obligations to avoid making false or misleading statements or engaging in misleading or deceptive conduct. Partner Dean Carrigan , Senior Associate Simon Lewis and Lawyer Andrew Murn report.
- Regulatory Guide 234
- Good practice guidance
- ASIC approach to assessing whether promotion is misleading or deceptive
- ASIC regulatory power
- Other specific guidance
How does it affect you?
- The Australian Securities and Investments Commission (ASIC) has signalled its intention to take an increasingly interventionist approach to the enforcement of laws prohibiting misleading statements and conduct in the promotion of financial products and services, including in the increasingly important online media.
- The regulatory guide provides practical guidance in relation to the design and implementation of promotional campaigns and advertising.
- ASIC will pay particular attention in its surveillance activities to promotions that do not comply with its 'good practice guidelines'.
ASIC recently released Regulatory Guide 234: Advertising Financial Products and Advice Services: Good Practice Guidance to provide practical assistance to the promoters of financial products and services, as well as the publishers of advertising for such promotions, in complying with their obligations not to make false or misleading statements or engage in misleading or deceptive conduct. The release of Regulatory Guide 234 is the culmination of an extensive consultation process.
ASIC has become increasingly concerned with ensuring that advertising conveys a clear, accurate and balanced message so as to avoid creating misleading or unrealistic expectations among consumers, and so recognising the importance of advertising in the financial decision-making process.
Who the guidance applies to
The guidance is targeted at the promoters of financial products and services, who are primarily responsible for promotional content. The guidance also applies to publishers of promotional advertising, who bear responsibility for the content and presentation of advertising material to consumers, although ASIC notes that it does not intend to impose a higher level of regulation on publishers.1
What the guidance applies to
The guidance applies to any communication the purpose of which is to inform consumers about, or promote, financial products or financial advice services. The guidance is designed to be medium-neutral, and so applies equally to communications made through print, broadcast, online and personal channels. The guidance applies to all types of financial products, including investment products, risk products, non-cash payment facilities and credit facilities.
The guidance contains examples of advertisements for financial products and financial advice services for which ASIC has taken action. These examples provide a useful reminder of the types of statement ASIC is likely to consider as false or misleading, and the types of conduct it is likely to consider misleading or deceptive. For instance, in ASIC's view, an advertisement should:
- provide a balanced message about the returns, benefits and risks associated with a financial product;
- contain no inconsistency between any warnings, disclaimers and qualifications and any other content, including headline claims;
- provide a realistic impression of the overall level of fees and costs a consumer is likely to pay;
- only make comparisons between financial products that have sufficiently similar features;
- include a warning that past performance is not indicative of future performance, whenever there is a reference to past performance;
- not use terms and phrases in a way that is inconsistent with their ordinary meaning as understood by consumers for example 'free', 'guaranteed' and 'secure';
- be capable of being clearly understood by the audience that might reasonably be expected to see it;
- be consistent with information contained in any disclosure document when it draws attention to specific product features; and
- not create unrealistic expectations about what a financial product or service can achieve.
The Regulatory Guide also says that, in addition to the content of an advertisement, promoters and publishers should consider the implications arising from the particular advertising medium they intend to use. For example, it may be inappropriate to use new media channels such as Twitter and Facebook to advertise financial products and financial advice services, if there is insufficient space to provide balanced information about the products and services in question. An advertisement may be misleading or deceptive if it is presented in a manner that is inappropriate for the chosen advertising medium.
The overall impression given by the advertisement, when viewed for the first time, is very important. In determining whether an advertisement is misleading or deceptive, ASIC will assess the content and format of the advertisement, the audience that will view it (even if that is different from the intended audience), the medium used to communicate it and its likely effect. Specific factors that ASIC is likely to consider include whether the advertisement provides:
- a clear description of the risks, fees and other drawbacks of the financial product;
- a realistic impression of the cost of the product or financial service;
- a clear and accurate description of the financial product, and a balanced and clear view of what it is likely to deliver, including balancing the nature of any headline claims made against the detailed content and the presentation of any qualifications or limitations applicable to the product or service;
- disclosure of all information a consumer may reasonably expect in particular, silence on important details can render a statement misleading;
- a realistic impression of what the financial advice is likely to achieve, cover or address; and
- an accurate description of the impartiality (or otherwise) of the financial service.
It is irrelevant whether the promoter or publisher intended to mislead consumers; the issue is whether the advertisement is in fact misleading or likely to mislead. ASIC will apply an objective test to resolve this question, regardless of the medium used by the promoter or publisher. The relevant test is the reaction of an ordinary and reasonable member of an advertisement's audience, being someone who is neither unusually astute nor unusually gullible.
If an advertisement is found to be misleading, a promoter cannot rely on an accurate product disclosure statement to cure its misleading effect.
ASIC is proactive in reviewing advertising for financial products and services, and has significant power under Part 7.10 of the Corporations Act 2001 (Cth) and Part 2 of the ASIC Act 2011 (Cth) to deal with advertisements that are misleading or deceptive. The range of enforcement actions available to ASIC include:
- obtaining an injunction to stop an advertisement;
- initiating compensation claims on behalf of consumers mislead by an advertisement;
- issuing an infringement notice;
- seeking a civil penalty;
- seeking criminal charges;
- making a banning order; and
- suspending or cancelling a promoter's Australian Financial Services (AFS) licence.
Advertising of certain financial products, due to their risk or nature, is the subject of further specific ASIC guidance. Regulatory Guide 234 should therefore be read in conjunction with other product-specific advertising guidance provided by ASIC; for example in other Regulatory Guides, such as:
- Regulatory Guide 156: Advertising of debentures and unsecured notes;
- Regulatory Guide 45: Mortgage Schemes: Improving disclosure for retail investors; and
- Regulatory Guide 232: Agribusiness managed investments schemes: Improving disclosure for retail investors.
ASIC plans to issue additional guidance for credit providers and credit service providers under the National Consumer Credit Protection Act 2009 (Cth) in relation to the advertising of credit products and services.
- Section 1044A of the Corporations Act 2001 (Cth) and section 12GI(4) of the ASIC Act 2001 (Cth) provide that it is a defence to a prosecution if a publisher receives an advertisement for publication in the ordinary course of their publishing business and did not know, and had no reason to believe, that its publication would amount to an offence.
- Stuart McCullochPartner,
Ph: +61 2 9230 4420
- Louise JenkinsPartner,
Ph: +61 3 9613 8785
- Robert PickPartner,
Ph: +61 3 9613 8721
- Chelsey DrakePartner,
Ph: +61 7 3334 3202
- Andrew PascoePartner,
Ph: +61 8 9488 3741