In other news, Humphrey B. Bear should not promote contracts for difference, and Spongebob Squarepants should not plug debentures.
ASIC's new regulatory guide - RG234: Advertising Financial Products and Advice Services: Good practice guidance - makes it clear that celebrities should not endorse or recommend financial products about which they actually know very little.
The new guide:
- brings together from disparate other regulatory guides a number of principles regarding the promotion of financial products/services;
- outlines ASIC's developing views on the use of new media (such as social networking services) for these purposes; and
- provides a number of examples and case studies illustrating ASIC's enforcement practices in the area.
The guide supplements ASIC's other product-specific guidance (eg. in relation to unlisted property schemes and debentures) and its guidance on specific issues (eg. using past performance information and giving forecasts).
Key principles
- Advertising should give a balanced message. It should not give undue prominence to the benefits of a product over the associated risks. This is consistent with ASIC's recently published approach to improving prospectus disclosure. Further, information about returns and benefits should be net of fees/costs to the extent practicable.
- Disclaimers and fine print should not be inconsistent with other parts of the advertisement, and cannot be used to correct a misleading statement elsewhere in the advertisement (particularly a headline).
- If fees or costs are referred to, a realistic impression of the overall level of fees and costs (including indirect fees/costs) should be given.
- Apples with apples: if comparisons with other products are made, they need to be sufficiently similar to justify the comparison. Comparative returns needs to be current, complete and accurate.
- Statements about past performance must include the usual disclaimer that they are not indicative of future performance. Statements about future performance need to be based on reasonable assumptions and include a statement that they are uncertain.
- Words should not be used in a way that is inconsistent with common usage, particularly words such as "free", "secure" and "guaranteed". Similarly, jargon should be avoided.
- Advertisements should be capable of being understood by the audience likely to be exposed to the advertisement. Advertising of complex products that are appropriate for only a limited group of investors should not be targeted at a wider audience.
- Information in an advertisement should be consistent with any relevant disclosure document (eg. prospectus or PDS).
- Photographs and images should not contradict other information in the advertisement or be used to convey a misleading impression.
- Advertisements for financial advice should not create unrealistic expectations of what the service can achieve.
The first principle above gives the fundamental premise of this consumer-focused guide. ASIC is looking for balance in the promotion of financial products and services: seeking to ensure that investors are properly informed when making investment decisions, and are not improperly swayed by advertising that conveys a misleading impression.
Can I tweet?
The new guide raises the question as to whether some forms of new media are appropriate to advertising financial products.
Is it possible to promote a financial product in a balanced way, giving equal prominence to benefits and risks in a 140 character tweet? Not likely.
Internet banner advertising also needs to be carefully considered: a prominent but transient headline should not convey a meaning that requires fine print to explain properly.
ASIC wants both promoters and consumers to be able to keep a record of an advertisement - this again can be difficult to achieve with new media.
The more complex the product, the more care is required - perhaps, ironically inconsistent with the casual nature of new media communication.
To whom does the guide apply?
The new guide is relevant to anyone promoting financial products or services: this includes product issuers and also advisers, distributors, agents and even publishers where, for example, the publisher contributes to the content of the advertisement eg. through an advertorial.
What should issuers/promoters do?
Take a step back: in assessing advertising of financial products/services, a key issue is the overall impression give by the advertisement. This needs to take account of the subject matter, the content, the format, the likely audience, the media used and the likely effect of the advertisement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
