Focus: ASIC guidelines for advertising of financial products
5 September 2011
In brief: Promoters of financial products and services will be required to produce accurate and balanced advertisements for their products under new guidelines proposed by the Australian Securities and Investments Commission. Publishers will be required to refuse to run advertisements that do not meet these requirements. Partner Julian Donnan (view CV) and Lawyer Mike Forster explain.
How does it affect you?
- ASIC Consultation Paper 167, Advertising financial products and advice services: Good practice guidance (CP 167) was released on 30 August 2011.
- The draft regulatory guidelines accompanying CP 167 require promoters of financial products and services to advertise in an accurate and balanced way that helps consumers make decisions that are appropriate to their circumstances.
- Publishers will be required to refuse or cease to run advertisements that are not accurate and balanced.
- ASIC has invited comments on CP 167 by 25 October 2011.
The Australian Securities and Investments Commission's (ASIC) proposed guidance recognises that promoters are inclined to focus on the benefits of their products, while consumers, confronted with information overload, complexity and uncertainty, can be tempted to make decisions on the basis of advertisements alone. The objective of the guidelines is to engender a more confident and informed consumer.
The proposed guidelines would apply primarily to promoters of financial products and providers of financial product advice, but also apply to third parties such as publishers of advertisements. The guidelines will also apply to virtually all advertising mediums and channels, from broadcast television, to telemarketing, to micro-blogging. In respect of these various mediums, specific guidance has been proposed regarding best practice. In regard to television, ASIC has said that advertising should be clearly distinguished from editorial content. Audio advertisements should be read at a reasonable speed (no 'batteries not included' type of disclaimers) and Internet advertisements should not require viewers to 'click through' to the fine print. Outdoor advertising should take into account how much information people will be able to process in their short viewing window (ie when driving past a billboard).
To ensure accurate and balanced advertisements, ASIC's proposed guidelines canvass:
- Nature of products. Advertisements should explain the nature of the products advertised in terms likely to be understood by the target audience. Benefits should not be given undue prominence compared with risks.
- Fees, costs and fine print. Fees and costs should be fully disclosed so that consumers do not have an unrealistic expectation of what the product will cost them. If fine print qualifies a headline claim, it should be made prominent.
- Comparisons, past performance and forecasts. Forecasts must be based on reasonable assumptions, and warnings should be given that past performance is not indicative of future results. Comparisons should only be made between similar products. Also, ratings and awards are implied endorsements and consumers should be given information to make their own judgment on the trustworthiness of any such endorsements.
- Terms, phrases and images. Certain terms and phrases that ASIC says have a strong emotive pull on consumers ('free', 'secure', etc) should not be used in a manner inconsistent with their ordinary meaning. Similarly, jargon should be avoided, as should photos and images that could distract from warnings or qualifications.
- Target audience. Promoters of financial products should consider the audience that will receive their advertisements, bearing in mind that complex products should not be mass marketed.
- Nature and scope of financial advice. Advertisements for financial services (particularly financial product advice) should not create unrealistic expectations about what can be achieved using that service.
The draft regulatory guide that accompanies CP 167 outlines a broad array of regulatory options for dealing with advertisements that are misleading or deceptive. As well as taking standard measures such as issuing stop orders, ASIC has indicated it may require promoters to publish additional disclosures, notices of the fact that they have breached the law, or refund affected customers.
The proposed guidance set out in CP 167 reiterates the theme of clear, concise and effective disclosure set out in April's Consultation Paper 155, Prospectus Disclosure: Improving disclosure for retail investors. This reflects ASIC's ongoing concern that investors disengage from the information needed to make sound financial decisions when that information is unclear, inaccessible or needlessly detailed. Two other recurring themes from Consultation Paper 155 are concerns with celebrity endorsements and ensuring that photos and images do not distract from key messages and warnings.
Challenges of new media
Enforcement of ASIC's proposed guidelines for new media such as micro-blogging on Twitter, 'comment' ads on Facebook and video streaming on YouTube may present unique difficulties. Through these mediums, individual consumers can be encouraged to develop, contribute to and pass on an advertising message, which can complicate ownership of, and responsibility for, a particular message.
A further problem may arise from ASIC's media-neutral stance, which prescribes the same standards for all advertising mediums and channels. For example, ASIC has stated that advertisements should be self-contained, and, for this reason, has ruled out Internet advertisements relying upon 'click through' qualifications or disclaimers (whereby consumers click on a banner to view full terms and conditions). Because the content limitations of banner ads are such that a click-through mechanism is the only way to provide complete information, ASIC's approach may check some forms of new media advertising.
Obligations on publishers
ASIC's proposed guidance states that whilst primary responsibility for advertising material rests with the organisation placing the advertisement, the publisher may have some responsibility for the content. This may occur where a publisher contributes to the content of an advertisement or otherwise has active involvement in the promotion of the financial product.
Publishers already have a defence to prosecution if they publish an advertisement in the ordinary course of business and did not know, or have reason to believe, the published advertisement would amount to an offence, but this may not apply in circumstances where the publisher is actively involved, for example, through co-branding.
In practice, for publishers, the guide may serve as a useful reiteration of existing obligations and the importance of sound compliance measures, including the need to:
- refuse or cease publishing advertisements that are not accurate and balanced;
- pay particular care to sponsored content or paid commentary; and
- seeking, where necessary, appropriate warranties from promoters that their advertisements comply with applicable laws.
- Julian DonnanPartner,
Ph: +61 2 9230 4113
- Stuart McCullochPartner,
Ph: +61 2 9230 4420
- Robert PickPartner,
Ph: +61 3 9613 8721
- Chelsey DrakePartner,
Ph: +61 7 3334 3202
- Andrew PascoePartner,
Ph: +61 8 9488 3741
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