Today the Advertising Standards Authority (ASA) has released a new Financial Advertising Code (Code) following a routine review and consultation process. The Code will replace the existing Code for Financial Advertising (Existing Code) and will come into effect from 1 March 2022 for new Financial Advertising, and 1 June 2022 for all Financial Advertising.

Links to the Code and the media release are available here and 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 the Existing Code the parties and products to which it will apply, including specific references to new products such as buy now pay later 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:

  1. Social Responsibility – Financial Advertising must be prepared and placed with a high standard of social responsibility to consumers and society.
  2. 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:

  1. Social Responsibility – the Code states that Financial Advertising must be easily understood by consumers.
  2. 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 existing the 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 current definition of ‘Financial Advertisements’ in the Existing Code is complex, and is framed as “advertisements for the lending, saving or investment of money, financial instruments, financial transactions, offers of securities and includes category 1 and category 2 products as defined in the Financial Advisers Act 2008”. ‘Advertisements’, in turn, has its own standalone definition in the Existing Code. The new definition of ‘Financial Advertisements’ is much simpler and more straightforward.

Our view

Overall, we welcome the greater clarity and simplicity introduced by the new Code in relation to the definition of ‘Financial Advertising’, and the update to the Code more broadly to ensure that it is fit for purpose. While some who submitted during the Consultation questioned whether we needed a standalone Financial Advertising Code, as the Advertising Standards Code would apply regardless, we think it is important for there to be standalone rules which apply in relation to Financial Advertising. It is also good to see that the ASA has considered the Financial Markets Authority’s ‘Guidance Note: Advertising Offers of Financial Products under the FMC Act’ and has concluded that there are no inconsistencies between it and the new Code. Care will be needed, however, to understand where there are products (such as most cryptocurrencies) that are not generally within the scope of the Financial Markets Authority’s guidance, but are intended to be captured by the Code.