- ASIC has released a new consultation paper setting out its proposed guidance which is intended to assist promoters and publishers present advertisements that are accurate and balanced and that help investors and financial consumers make decisions that are appropriate for them.
- Applies to both promoters (e.g. issuers, distributors, financial advisers) and publishers of financial products and financial advice services.
- Applies to all types of media, including television, radio, newspapers, internet, outdoor advertising.
- Includes ‘advertising-specific’ guidelines as well as ‘media-specific’ guidelines. A
- SIC is seeking comments from the industry by 25 October 2011, including comments on likely compliance costs, likely effect on competition and other impacts, costs and benefits.
On 30 August 2011, ASIC issued Consultation Paper 167 Advertising financial products and advice services (CP 167) which is intended to “assist promoters and publishers present advertisements that are accurate and balanced and that help investors and financial consumers make decisions that are appropriate for them”.
CP 167 follows on from a number of research projects commissioned by ASIC into the role of advertising in investor and financial consumer decision-making. Among other things, it was found that advertising played a significant role in relation to investment decisions made by investors and financial consumers, who relied heavily on media sources (including internet, financial magazines, daily newspapers, television programs and radio programs) to access information on investment opportunities.
Submissions in relation to CP 167 may be made to ASIC by 25 October 2011. ASIC expects to release a final regulatory guide by January 2012.
To whom does the guidance apply?
It is proposed that the guidance will apply to promoters of financial products and financial advice services (e.g. product issuers or designers, financial advisers and distributors) and publishers and the media who deal with advertisements for financial products and services.
To what does the guidance apply?
The proposed guidance applies broadly to any communication whose purpose is to inform consumers about or promote financial products or financial advice services, including advertising communicated through any medium in any form, e.g. magazines, newspapers, radio, television, outdoor advertising (billboards, transit advertising), internet (including banner advertisements, video streaming, social networking and internet discussion sites), product brochures, promotional fact sheets, direct mail (including post, facsimile or email), telemarketing, presentations and seminars.
The proposed guidance applies to advertising of all types of financial products, including investment products (e.g. securities, interests in managed investment schemes) and risk products (e.g. derivatives, insurance products). The guidance also extends to both general and personal financial product advice.
Statutory obligations relating to advertising of financial products and advice services
The Corporations Act 2001 and ASIC Act 2001 currently set out a number of obligations and restrictions which apply to advertisements of financial products and advice services, including the prohibition on making false or misleading statements or engaging in misleading or deceptive conduct. Significant penalties and other remedies (including imprisonment, fines, compensation or injunctions) may apply to a person who is found to have contravened any such provision.
ASIC has indicated that the proposed good practice guidance in CP 167 may help promoters and publishers comply with such statutory obligations in their advertising of financial products and advice services.
Good practice guidance
The proposed good practice guidance set out in CP 167 seems to be aimed at clarifying ASIC’s position regarding the advertising of financial products and financial advice services through all types of media, drawing on disclosure principles and guidance previously published in other ASIC regulatory guides and releases, such as the good disclosure principles set out RG 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) and the guidelines set out in RG 53 The use of past performance in promotional material and RG 170 Prospective financial information.
For example, CP 167 sets out the following good practice guidance on advertising of financial products and financial advice services which generally reflect the principles and guidelines which have been discussed previously by ASIC (whether in the context of promotional material or disclosure documents):
- advertisements should give a balanced message about the returns, benefits and risks associated with the product
- comparisons should only be made between products that have sufficiently similar features
- past performance should be accompanied by a warning that past performance is not indicative of future performance
- forecasts should be based on reasonable assumptions and should state that the forecasts are not guaranteed to occur
- industry concepts or jargon should be avoided and
- graphical representations should not be ambiguous or overly complicated.
CP 167 also addresses a number of ‘advertising-specific’ issues through the good practice guidance. For example:
- warnings, disclaimers and qualifications should not be inconsistent with other content (such as headline claims) in an advertisement and should have a proportionate level of prominence to the claims to which they refer
- advertisements should be self-contained (e.g. consumers should not need to access a warning or disclaimer in another website or another page on the same website)
- any fees or costs referred to in an advertisement should give a realistic impression of the overall level of fees and costs that a consumer is likely to pay, including any indirect fees or costs
- advertisements should be capable of being clearly understood by the audience that might reasonably be expected to see the advertisements
- advertisements for complex products that are only appropriate for a limited group of people should not be targeted at a wider audience and
- content should be consistent with information contained in any disclosure document (e.g. a PDS or prospectus).
In addition, ASIC sets out some ‘media-specific’ guidance relating specifically to the following types of media or advertising:
- mass media (including radio, television, newspapers, magazines and the internet) – since mass media has the capacity to reach a wide audience, promoters should consider the characteristics of the actual audience that is likely to see the advertisement (e.g. level of financial literacy, knowledge and demographics) and whether the advertisement is accurate, balanced and helpful for that audience. In addition, there should be a clear demarcation between advertising and (possibly reacting to an increasingly popular technique amongst advertisers) program content and advertisements should not be presented as news or similar programs
- audio advertisements (e.g. radio, telemarketing and messages on hold) – warnings or disclaimers should be read at a speed that is easy for an average listener to understand film and video advertisements – warnings should be prominent despite the distractions typically involved in relation to film and video advertisements and an average viewer should easily understand any disclaimer or conditions on the first viewing
- internet advertising (e.g. webpages, banner advertisements, video streaming, social networking, microblogging and internet discussion sites) – internet advertisements should be self-contained and any important disclaimers or warnings should be on the same page as the advertisement (e.g. without having to click through to additional information). ASIC also warns promoters to carefully consider the appropriateness of some new media channels if content limitations mean there is insufficient space to provide balanced information. Similar to radio and television advertising, any information should be easily understood by an average consumer on first viewing
- outdoor advertising (e.g. billboards, posters, signs in public venues and aerial displays) – promoters should consider the conditions under which an outdoor advertisement will be viewed as such forms of advertising may not facilitate close scrutiny by a consumer to allow for an accurate and balanced message to be presented, especially considering they may be viewed from a distance or from a moving vehicle. ASIC has suggested that such advertising may be better suited to promoting brand or product recognition rather than conveying more complex information about a product.
Both promoters and publishers will need to take care in preparing, distributing, making available or publishing advertising material in relation to financial products or financial advice services in compliance with the proposed good practice guidance. Although some of the principles and guidelines have been published previously by ASIC in similar contexts, the issue of CP 167 (following on from recent research projects commissioned by ASIC) suggests that ASIC is likely to more carefully scrutinise advertisements relating to financial products or services.
Accordingly, promoters and publishers should take this opportunity to carefully consider the actual audience that is likely to view their advertisements to ensure that each advertisement provides adequate information in a manner that is balanced and helpful for investors or financial consumers. In addition, it will be important to take into account the type of media that is being used (as different considerations apply for different media), the complexity of the product that is being advertised and the overall impression of the advertisement to ensure that the advertisement is not misleading or deceptive.