Today the Financial Markets Authority (FMA) published a consultation paper seeking feedback in relation to its proposed guidance about advertisements for financial products under the Financial Markets Conduct Act 2013 (FMCA).
The draft guidance is available online.
The consultation paper and the consultation page containing details on how to make a submission can each be found on the FMA’s website.
Who needs to read it? Why?
All financial market participants who may advertise financial products should carefully read the proposed guidance and consider taking the opportunity to provide feedback through this consultation so that the FMA (and the market) can ensure the guidance is fit for purpose.
Other businesses in the financial services industry should also read the proposed guidance, as the FMA notes that the guidelines “may also be applicable to other areas such as the supply or potential supply of financial services”.
What does it cover?
The proposed guidance focuses on how the fair dealing requirements under part 2 of the FMCA apply to advertisements for financial products. It outlines the fair dealing and disclosure provisions and sets out the FMA’s expectations for how the principles of fair dealing will be applied in practice to the advertising of offers of financial products.
The proposed standards and guidelines are broken down and summarised as follows:
- advertising must be truthful and accurate;
- take care when comparing different products;
- balance risk and reward;
- take care with phrasing and industry jargon;
- forecasts must be based on reasonable and supportable assumptions;
- do not overemphasise performance at the expense of other material information;
- warnings and disclaimers should be prominent;
- clearly disclose fees and costs;
- do not claim to be endorsed, approved or regulated;
- advertising should be discernible from other content (such as sponsored content); and
- identify offers that are made only to wholesale investors.
The guidance also outlines the FMA’s enforcement options to address false, misleading, deceptive or confusing behaviour.
Advertising for financial products and services is rigorously scrutinised by both the regulator and, often, competitors. Given the sweeping nature of the fair dealing rules, it is very helpful to have guidance as to how the FMA is likely to interpret them in the context of different types of advertising.
Having fair and clear advertising will lead to better investor outcomes. Where advertising is misleading or confusing, the opposite equally applies.
Financial market participants should, however, consider the proposed guidance carefully and use the opportunity to give constructive feedback to the FMA.
Submissions close on Tuesday 16 February 2021. Final guidance will be issued by the FMA afterwards.
If you have any questions in relation to the consultation, or the FMCA and fair dealing requirements in general, please contact one of our experts.