Whatever your financial services business model, you are
legally responsible for the content of the promotional material
that you publish or otherwise make available in the public arena.
This is the first of two blogs about the general principles
covering promotional materials and a number of particular words,
the use of which is either restricted or likely to raise legal and
regulatory concerns. This part will cover the legal position in
relation to promotional materials and misleading and deceptive
The legal position in relation to promotional materials
Promotional material can be the content of your website,
regulatory disclosure documents, print brochures, advertising
(whether mass media or social media), client presentations, call
centre scripting or direct mail campaigns.
The chief compliance considerations to keep in mind with
promotional material are to avoid engaging in misleading or
deceptive conduct and to avoid using restricted words. Other
important considerations include rules regarding intellectual
property rights and defamation laws.
Failure to meet these requirements can lead to unwanted
attention from ASIC as well as the lawyers of disgruntled clients,
competitors and copyright owners.
Misleading and deceptive conduct
Financial products and services are usually complex, difficult
to understand and with uncertain risks and benefits. Accordingly,
providers of financial services need to be aware of the overriding
making false or misleading statements; and
engaging in misleading or deceptive conduct.
In the competition to attract the attention of potential clients
the search is always on for the marketing strategy that carries the
greatest impact. This can lead to issues with:
products and services being incorrectly described (especially
in relation to risk and benefits);
products and services not being fit for the expressed
creating expectations that cannot be met;
comparisons with competing products and services;
celebrity and "satisfied customer" endorsements;
material information being omitted or not made sufficiently
For example, ASIC took action against a bank that advertised an
'everyday savings account' which had features that, in
fact, made it less flexible than the name implied and more suitable
for long term saving.
An advertisement's "headline" claim need not
necessarily carry all relevant information with it as long as the
full story is presented in a prominent and proximate manner. In
this regard, the use of "fine print" disclosure, warnings
and disclaimers is problematic as the Courts often find such items
to be insufficiently prominent - with the result that they are
An advertisement stating or implying that a particular result or
positive outcome is likely, should also include an explanation of
any assumptions made and disclosure of any uncertainty or risks
associated with obtaining that result or outcome.
In the 2012 case of ASIC v Camelot Derivatives Pty Ltd,
the Federal Court considered Camelot's promotion of an options
trading strategy. Camelot's managing director made statements
to the effect that clients had and could expect to earn significant
returns from this strategy, which Camelot had substantial
experience in implementing successfully. Unfortunately, the GFC
intervened and between 2008 and 2010 many clients incurred
significant losses. The Court found that Camelot's clients were
induced to use the Camelot strategy by the representations that
they could make significant profits through options trading.
Camelot's conduct was misleading and deceptive because it did
not adequately explain the risks involved, and did not explain
clearly the potential for Camelot to make significant profits from
brokerage on these transactions – while its clients made
significant losses in the market.
Stay tuned for the second blog which will discuss
intellectual property rights and our top 12 problem words.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Providers should action the five takeouts in this article relating to ASIC RG 255 and providers of digital advice.
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