The Advertising Standards Authority (ASA) is reminding market participants that the Financial Advertising Code (Code) comes into force for all Financial Advertising from 1 June 2022. The Code replaces the Code for Financial Advertising, and came into force from 1 March 2022 for new Financial Advertising.
The link to the Code is available here.
Who needs to read it? Why?
All financial market participants who may advertise financial products or financial services should carefully read the Code and should ensure that their own advertising and practices are consistent with it. It will also be relevant to other agencies and media organisations, as the Code emphasises that “the responsibility to comply with all aspects of advertising regulation is shared between all the parties to an advertisement”.
The new Code does describe in more depth than its predecessor the parties and products to which it will apply, including specific references to new products such as buy now pay later (BNPL) schemes and cryptocurrencies.
What does it cover?
The Code updates the wording of the Principles of Financial Advertising (the standards expected by the ASA in Financial Advertising) (Principles), which are now framed as:
- Social Responsibility – Financial Advertising must be prepared and placed with a high standard of social responsibility to consumers and society.
- Truthful Presentation – Financial Advertising must be truthful, balanced and must not be misleading.
The Code also introduces Rules in relation to the Principles, which specify how the Principles are to be interpreted and applied. In relation to:
- Social Responsibility – the Code states that Financial Advertising must be easily understood by consumers.
- Truthful Presentation – the Code states that:
- Financial Advertising must not mislead or be likely to mislead, deceive or confuse consumers, abuse their trust or exploit their lack of knowledge. Misleading may be by implication, inaccuracy, ambiguity, exaggeration, unrealistic claim, omission, false representation or otherwise.
- Advertisements must not use tests, surveys, research results or quotations from technical and scientific literature in a manner that is misleading or deceptive.
The Code also updates the Guidelines in relation to the Principles, which provide the information and examples included to explain the Rules.
Finally, the Code also amends the existing definition of ‘Financial Advertising’, which is now framed in the new Code as “any message, the content of which is controlled directly or indirectly by the Advertiser, expressed in any language and communicated in any medium with the intent to influence the choice, opinion or behaviour of those to whom it is addressed and is for the purpose of promoting a Financial Product or Service”.
The ASA updated this definition to make it “clearer and in more detail for industry and consumers to understand”. The wording used in the definition of ‘Financial Advertisements’ in the Code for Financial Advertising was complex. The new definition of ‘Financial Advertisements’ is much simpler and more straightforward.
Overall, we note that the commencement date for the application of the Code to all Financial Advertising is fast approaching, and therefore market participants will want to make sure that their own advertising and practices are consistent with it. This includes having internal procedures and policies in place to make sure that all Financial Advertising is thoroughly vetted for compliance with the Code before going public.
Market participants will also need to ensure that in addition to complying with the Code, they also comply with the Financial Markets Authority’s existing ‘Guidance Note: Advertising Offers of Financial Products under the FMC Act’.