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The Financial Markets Authority (FMA) is seeking input on what good conduct in the advertising of offers of financial products should look like.
Submissions on the FMA’s proposed guidance close on Tuesday 16 February 2021.
Context
The statutory obligations are set out in the fair dealing provisions in the Financial Markets Conduct Act 2013 (FMCA). These echo the Fair Trading Act and prohibit misleading or deceptive conduct, false or misleading representations, and the making of unsubstantiated claims.
Summary of FMA’s expectations
The Guidance sets out the FMA’s expectations of financial product advertising. A key principle is that whether an advertisement is likely to mislead or confuse depends on overall impression, as perceived by the investor. From this, it follows that:
- advertising which is likely to mislead or confuse, without actually being misleading or confusing, is sufficient to breach the FMCA fair dealing provisions
- intent to mislead or confuse is irrelevant
- advertising (or conduct generally) is more likely to mislead where a financial product is complex, or where the investor base being targeted is vulnerable or ill-informed, and
- representations that are true and verifiable in isolation are capable of generating a confusing or misleading impression when viewed holistically.
The Guidance also sets out the qualities and hallmarks that the FMA expects financial product advertisements to have. These include:
- clear disclosure of fees and costs
- avoidance of claims that a product is ‘endorsed’, ‘regulated’, or ‘approved’
- care in the use of product comparisons and in statements around product performance
- where offers open to wholesale investors only, clear identification of that fact, and
- truthfulness and accuracy.
Consultation questions
The consultation covers five areas.
- General scope of the guidance, and whether it adequately captures all relevant parties involved in advertising and promoting offers.
- Short form advertising (i.e. banner advertisements where readers can ‘click through” to a webpage which includes the information required by sections 90-92 of the FMCA).
- Potential gaps in the guidance, including any examples of poor conduct in the advertising of financial products that have not been adequately addressed.
- Requirements for offers restricted to wholesale investors.
- Miscellaneous and other considerations, for example, any unintended consequences that may arise from the proposed guidance.
Next steps
If you would like more information or assistance with making a submission, please get in touch with one of our contacts.
