The Financial Markets Authority (FMA) has opened consultation on proposed guidance about advertisements for financial products.
Advertising is a topic that is frequently brought to the FMA’s attention and is an area of concern due to the influence it may have on investor knowledge and behaviour. The regulator regularly engages with issuers and other businesses on the disclosure requirements that apply to regulated offers. The proposed guidance sets out FMA’s expectations of what good conduct in the advertising of regulated products looks like.
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 well as traditional advertising mediums in print, broadcast, digital and outdoor formats, the guidance also applies to mobile apps, product brochures and promotional fact sheets, direct mail (e.g. written letters or email), group presentations and seminars, and advertorials.
The guidance sets out that advertisements should:
- be truthful and accurate;
- take care when comparing different products;
- balance risk and reward;
- take care with phrasing and jargon;
- ensure forecasts are based on reasonable and supportable assumptions;
- not overemphasise performance;
- prominently display warnings and disclaimers;
- clearly disclose fees and costs;
- not claim to be endorsed, approved or regulated;
- be discernible from other content (such as sponsored content); and
- identify offers that are made only to wholesale investors.
The guidance complements existing information published by the FMA, including the crowdfunding and peer-to-peer lending guidance, regulatory response guidelines and website content on the FMA’s approach to the fair dealing and stop order provisions.
Submissions close on 16 February 2021. Final guidance will be issued afterwards.