The Financial Markets Authority (FMA) of New Zealand today issued new guidance on how firms should be advertising financial products.
The regulator consulted on proposed guidance on advertising last year. The final guidance, published today, reflects feedback from consultation and sets out three key principles for organisations to consider when advertising financial products or services:
- What is the overall impression created by the advertisement when viewed for the first time?
- Ensure the advertisement includes all relevant information, as omissions can be misleading, deceptive or confusing
- Any claims in the advertising must be substantiated.
The guidance specifies that advertisements should be truthful and accurate, balance risk and reward, not overemphasise performance, and prominently display warnings and disclaimers. Importantly, ads should not claim to be endorsed, approved or regulated. They also have to be discernible from other content.
The guidance acknowledges that the format of some advertising is limited or restricted (such as social media tiles or banner advertisements on webpages). This constrains the disclosure information that can be displayed, and firms often hyperlink to a landing page with required disclosure information.
The FMA expects firms to ensure “click through” ads do not create a misleading impression, the messaging in both the initial ad and landing page must be consistent, and all required disclosures should be well displayed on the landing page. For example, it is not acceptable for the landing page to omit the required disclosures and simply invite an investor to fill out a form to receive more information.
As well as traditional advertising mediums in print, broadcast, digital and outdoor formats, the guidance also applies to social media, seminars, newsletters, product brochures and promotional fact sheets, direct mail (e.g. written letters or email), group presentations and seminars, and advertorials, among other formats.
The guidance focuses on how ‘fair dealing’ requirements in the Financial Markets Conduct Act (FMC Act) apply to advertisements for financial products. Fair dealing provisions apply broadly to conduct relating to anyone (regardless of where they are based) offering financial products to the New Zealand public; they prohibit:
- misleading or deceptive conduct, including conduct which is likely to mislead or deceive;
- false, misleading or unsubstantiated representations; and
- offers of financial products in the course of unsolicited meetings.
As the fair dealing provisions are long established within the 2014 FMC Act, firms are expected to take immediate steps to ensure their advertising is consistent with the law. The FMA expects firms to ensure their current marketing practices and campaigns are in line with the final guidance over the next two months. Where there are any examples of marketing that takes advantage of vulnerable customers in the current COVID situation, the FMA will take action.
As well as enforcement powers under the fair dealing provisions, the guidance notes the FMA can use regulatory tools, such as a stop order or direction order, to promptly take action against advertising that may confuse or mislead consumers.