Whether your business provides financial services, credit services or anything else, you are legally responsible for the content of the promotional material that you publish, or otherwise make available, in the public arena. In this article we set out ten tips to help keep your promotional material from being misleading or deceptive.
This promotional material may include the content of your website, brochures, print or electronic media advertising, client presentations, call centre scripting, or direct mail campaigns. It also includes advertising on social media. The same considerations also apply to regulated disclosure documents such as your financial services or credit guide, and product disclosure statements.
While the chief compliance considerations to keep in mind are to avoid engaging in misleading or deceptive conduct and to avoid using restricted words. Other important considerations include the rules regarding copyright and defamation.
Failing to meet these requirements may lead to unwanted attention from ASIC. It may also attract the unwanted attention of lawyers for dissatisfied clients, competitors and copyright owners.
You may not think that misleading and deceptive conduct is "a big deal", yet in the latest public figures available (for the first half of 2019), approximately 23% of ASIC's enforcement outcomes in the financial sector related to dishonest conduct and misleading statements.
You may not think anyone will notice your modest website, yet the internet reaches into almost every home and office. In addition to its own surveillance, ASIC compiles market intelligence from complaints it receives, breach reports, and even other ASIC filings (such as financial statements).
Be organised – and stay that way
Most businesses have a marketing strategy that utilises themes or a "look and feel" that sets their business apart in the market place. This might include branding, colours, font colours and styles, and layout. It often also includes standard text describing the business, its products and their benefits.
Tip 1: Develop a library of templates with
pre-approved standard text and layouts to ensure consistency and
minimise the work required when issuing a new document.
You may also be able to establish a suite of disclaimers for various kinds of promotional material with instructions about when each is required.
Tip 2: Make sure you have a process for keeping standard promotional material such as brochures and your website accurate and up-to-date. This might include subscription to a regulatory update service to ensure you find out about relevant changes in the law, change management processes to ensure your promotional materials are reviewed as part of all business changes (e.g. new product offerings), periodic reviews diarised in a compliance calendar, limits on who has authority to make changes, and a change register to record every change made to the promotional materials and the approvals obtained.
Know your product. Don't guess!
Many sales teams are geographically dispersed and are talking about your product in print, on the phone, in presentations and in meetings. You may have distribution networks whereby other businesses are also talking about your product and making representations to clients.
In the financial services and credit regulatory frameworks, what is being said about your product in all of these channels is likely to be your responsibility. The prohibition on engaging in misleading or deceptive conduct is not limited to intentional behaviour. How do you make sure everyone is on message?
Tip 3: Identify the product expert (or 'champion') in your business and make sure your product expert approves all training, promotional and other materials that mention or refer to the product.
Tip 4: Make sure all sales staff, including third party channels, receive product training as part of a product launch, and that this training is supported by reference materials and refreshed whenever there are product changes. Follow up the training with a monitoring and supervision program that fits your business model
Warnings, disclaimers and qualifications
ASIC and other regulators realise that an advertisement's headline claim does not necessarily need to carry all relevant information with it so long as the full story is presented in a proximate and prominent way. That is, the greater the amount of qualification required to balance that headline claim, the more prominent and proximate to the headline claim it should be. ASIC and the courts will generally consider the overall impression of the promotional material.
Tip 5: Consider whether your disclaimers are proximate and prominent enough to the headline statements in your promotional material to be easily found and absorbed at the same time.
Words to avoid
'Independent', 'unbiased', 'impartial', and other words with similar meaning, are prohibited under the Corporations Act and the credit legislation unless the user receives NO commission or other volume-based remuneration, or any gifts or benefits from a financial product issuer that might be expected to influence its advice. This is a high bar to leap. Contravening this requirement is an offence.
'Bank', 'stockbroker', 'insurance broker': these words require particular authorisation to use from APRA (in the case of 'bank') and ASIC (in the case of stock, insurance or futures brokers).
'Free': this word must be used with particular care to avoid the risk of giving a misleading impression. A service is not free if it is subsidised through other charges. For example, advice is not 'free' if it is paid for out of fees and costs of financial products clients are placed in as a result of the advice. It is better to describe the 'free' product or service as being provided 'at no extra charge'.
'Safe', 'Secure', 'Guaranteed': if you don't intend to cover any loss your client may incur, then avoid these words as they imply that you will. Be particularly wary of using the word 'guaranteed' as it has a legal meaning which differs to its common use.
'Easy', 'Simple': ASIC considers financial investment to be complicated and tends to regard solutions labelled as being 'easy' or 'simple' as ignoring relevant considerations.
Tip 6: Develop standard ways of describing your business and ensure that all staff (including customer facing staff) know what they are.
Misleading or deceptive conduct
Financial products are frequently complex and difficult to understand, and their risks and benefits uncertain. Financial services and credit providers frequently, therefore, fall foul of the overarching prohibitions on:
- making false or misleading statements
- engaging in misleading or deceptive conduct.
In the competition for potential clients' attention, the search is always on for words that carry the greatest power. These choices should be made with care and you need to consider whether your marketing approach creates expectations that cannot be met, or indicates a level of risk (or conversely security) that may not reflect your product.
For example, ASIC took action against a bank that advertised an 'everyday savings account' but had features that, in fact, made it less flexible than the name implied and more suitable for long term saving.
Furthermore, ASIC points out in its Regulatory Guide 234 (Advertising financial products and services: good practice guidance) that any comparison of benefits or returns should be accurate and balanced and have a reasonable basis.
Promotional material should not present a comparison in a way that creates a misleading impression. The use of broad terms like 'high' or 'low' to compare benefits or returns may mislead if it is not explained that the benefits or returns will only be gained in certain situations.
Tip 7: Ensure you have evidence to substantiate every claim you make about your product and services.
An advertisement stating or implying that a particular result or positive outcome is likely, should also include a statement about the risks associated with obtaining that benefit, or the product generally. This may include a discussion of the assumptions made in predicting that benefit.
For example, if a financial product is linked to the markets and advertised as having an expected rate of return, it should also be explained that this expected return may not arise, and that the client's balance may even fall.
In the 2012 case of ASIC v Camelot Derivatives Pty Ltd , the Federal Court considered Camelot's promotion of an options trading strategy known as the 'Iron Condor'. Camelot was an options trading house that advised and dealt on behalf of its clients in derivatives and other financial products, particularly options. Its 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 clearly explain the potential for Camelot to make significant profits from brokerage on these transactions – while its clients made significant losses in the market.
Tip 8: Remember to acknowledge the risks as well as the benefits when promoting your products or services.
Copyright and intellectual property
Music or a known fictional or other character can be a powerful marketing tool. Similarly, you may find a book or a website that expresses perfectly the words that you want to say, or that adds useful depth to your offering (as in the case of market research for particular financial assets). If you use the intellectual property of another person without their permission you risk a claim for damages from the owner as well as reputational issues.
Using other people's work without their permission, or
giving them credit (attribution), is often a tempting shortcut but
ultimately it poses a risk to your reputation, and if you have to
settle a claim for damages from an intellectual property owner, you
may have to pay to the owner the profits you have made from using
their intellectual property.
Tip 9: When you are using the words, trademarks or the work of others, check carefully before you use them as to whether you should get permission from the owner. Always cite your sources if you are relying on technical analysis.
If something you say or publish harms the reputation of someone else, then that person has a right to seek an injunction to prevent the publication and recover damages from you.
Tip 10: Before you disparage a competitor or their products or services, consider whether anything you plan to say reflects on their character in a way that makes it likely people may think less of them as a result.
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.