The Australian Securities & Investments Commission has taken its crackdown on misleading ads for financial products and services one step further by issuing a guide that strives to restrict the language of financial planners.
Guidelines prepared by Peter Kell, an ASIC commissioner focus on promoters highlighting the risk element of financial products to consumers so that they are aware of the high risk of financial trading.
‘Ads that do not accurately represent the financial product or its key features and risks, or the nature and scope of financial advice, can create unrealistic expectations that lead to poor financial decisions,’ he said.
Kell noted that the Australian Securities & Investments Commission has already been successful in eliminating a few of the ‘bad apples of poor products’ from the financial industry, with almost 120 adverts banned or changed since July 2010.
However, he emphasised that in future penalties will be harsher for adverts that the Australian Securities & Investments Commission didn’t perceive to be transparent, accurate or balanced.
‘The outcomes we will aim for when confronted with suspected breaches will involve potentially stronger penalties than we have sought in the past,’ said Kell. The 47-page guide includes 38 examples of such adverts and follows on from a consultation issued by ASIC last year.
Those found guilty will face fines, injunctions, public warning notices and in severe cases jail sentences under new guidelines published by ASIC. ASIC enforcers will also ensure that advertising catch words like ‘guaranteed’, ‘secured’, ‘stress free’, ‘low rosl’, and ‘protected’ are used in a proper context.
The guidelines in particular state that:
‘Information about the risks of a financial product should be clear, and not hidden or difficult to understand, and should be given sufficient prominence to information about returns and benefits. The tone of the advertisement should not undermine the importance of the risks.’
The guidelines cover superannuation products as well as insurance policies and CFDs. ASIC referred to CFDs as risky financial products that can expose investors to large losses and ads shouldn’t allude to the contrary.
‘Build personal wealth with low-risk trading strategies’ or ‘Safely harness the leverage power of CFDs’ were phrases singled out by ASIC as examples of misleading ads that didn’t properly reflect the risks involved in trading in CFDs.
Kell stated that the Australian Securities & Investments Commission would be looking more closely at ads that target vulnerable retirees and would also look at clamping down on the online and mobile environment.
‘These continue to be growth areas for the promotion of finance advice and services,’ said Kell, who added they have already taken action against a number of online promoters.
“But we would prefer to see them get it right the first time,” he said.
