Proposals to tighten financial product advertising

5 September 2011 – On 30 August 2011, ASIC issued a consultation paper seeking feedback on proposals to tighten the rules governing the advertising of financial products.

The proposals provide product issuers with more specific guidance as to the content and form of advertisements and are likely to have a material impact on the way in which financial products are advertised in the future.

ASIC’s proposals are contained in Consultation Paper 167 – Advertising financial products and advice services: Good practice guidance.  Comments to ASIC on the proposals are required to be submitted by 25 October 2011.

ASIC’s proposals are a response to the increasingly complex environment in which investors operate and the fact it believes many investors struggle to understand the structure and associated risks of the more complex financial products that are available.

ASIC is concerned to ensure that advertisements are balanced so that investors make decisions that are appropriate for them.

The proposals are far-reaching and apply to all types of financial products including:

• investment products;
• risk products;
• non-cash payment facilities; and
• credit facilities.

ASIC expects that:

• all advertisements will present a balanced view of the risks and benefits of the particular product that is being advertised;
• claims made will be consistent with relevant disclosure documents;
• images will not be used if they are not relevant to the product being advertised, or if they contradict, reduce or detract from any qualifying statements (for example, ASIC suggests that images associated with success, wealth, safety and security may detract from a message that a product carries risks); and
• tables and diagrams will specify their key assumptions, and select scales, time periods and other inputs that do not give skewed outputs.