After seeking more disclosure from CFD companies, the Australian Securities & Investments Commission is now looking to curtail cases of abuse involving misleading and deceptive advertising by financial services companies including CFD providers, banks and insurance companies.
Earlier this week ASIC published a consultation paper in an effort to enforce higher standards. ASIC chairman Greg Medcraft was quoted saying that the paper was designed to ‘help promoters and publishers comply with their legal obligations’, a reminder that in some instances publishers also have to check the content of advertising.
The list of 21 proposals includes a requirement that warnings, disclaimers or qualifications in radio advertisements should be read clearly at a pace that is easily understandable by listeners. For film or video adverts, warnings or disclaimers should not be ‘softened’ by distracting sounds or images. In addition, in print or internet advertising, warnings or disclaimers should be included in the advertisement and not on a separate section. In particular the small print under TV adverts might end up banned. Words such as ‘guaranteed’, ‘secure’ and ‘free’ might also be unacceptable in future – as might the ubiquitous star-ratings and other rankings.
In relation to CFDs, Mr Medcraft has always vocally opposed mainstream TV advertising of margin traded products but this is just one of the issues that the consultation paper covers. The discussion paper notes that that an advert for contracts for differences should not carry bold claims such as ‘Build personal wealth with low-risk trading strategies’ and ‘Safely harness the leverage power of CFDs’ given that CFDs are inherently high risk financial products on which investors could lose in excess of their original investments.
The Sydney Morning Herald highlights the website for Wealth Within as an example. The ‘8-year total return’ for Wealth Within’s managed investments is an astounding 186.83%, according to the literature. That’s an average annual return of 23.35% which is great by any standards but apparently these figures were based on ‘model returns’ as opposed to an ‘averaging of real investment returns’.
ASIC is now inviting comments on the discussion paper and draft regulatory guide between now and October 25.