Misleading or deceptive regulatory obligations
The Corporations Act prohibits engaging in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive (s1041H). Further, under the the ASIC Act, a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive (s12DA).
A breach of the misleading or deceptive conduct provisions is a Reportable Situation to ASIC (other than conduct impacting a single customer where no harm is caused).
What is misleading or deceptive conduct?
The key requirement is that the impugned conduct leads, or is likley to lead, a person into error.
Advertising financial products and services (including insurance): Good practice guidance
ASIC has developed good practice guidance (RG 234) to help promoters comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct.
The promoter will sometimes be the insurer, underwriting agency or broker but can also be a distributor or agent.
ASIC’s guidance applies to advertising communicated through any medium in any form, including:
- magazines and newspapers
- radio and television;
- outdoor advertising, including billboards, signs at public venues, and transit advertising;
- the internet, including webpages, banner advertisements, video streaming (e.g. YouTube), and social networking and microblogging (e.g. LinkedIn);
- social media and internet discussion sites;
- mobile phone messages (e.g. SMS, MMS, text messages);
- product brochures and promotional fact sheets;
- direct mail (e.g. by post, facsimile or email);
- telemarketing activities and audio messages for telephone callers on hold; and
- presentations to groups of people, seminars and advertorials.
Overview of Good practice guidance
The following is extracted from RG 234, I have added general insurance context where relevant to do so.
Returns, features, benefits and risks
Advertisements for general insurance products should give a balanced message about the returns, features, benefits and risks associated with the product. Benefits should not be given undue prominence compared with risks.
Warnings, disclaimers, qualifications and fine print
Warnings, disclaimers and qualifications should not be inconsistent with other content in an advertisement, including any headline claims. Warnings, disclaimers and qualifications should have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing the advertisement.
Consumers should not need to go to another website (or other page of the website) or document (such as a PDS or TMD) to correct a misleading impression.
Fees and costs
Where a fee or cost is referred to in an advertisement, it should give a realistic impression of the overall level of fees and costs a consumer is likely to pay, including any indirect fees or costs. The premium, commission and government charges should be clearly identified.
Comparisons
Comparisons should only be made between products that have sufficiently similar features or, where an advertisement compares different products, the differences should be made clear in the advertisement. This is important for comaprison websites.
Use of certain terms and phrases
Terms and phrases should not be used in a particular way by industry where these are not consistent with the ordinary meaning commonly recognised by consumers (e.g. ‘free’, ‘secure’ and ‘guaranteed’).
Industry concepts or jargon should be avoided unless the promoter is confident that these terms will be understood by the audience.
Target audience
Advertisements should be capable of being clearly understood by the audience that might reasonably be expected to see the advertisements.
Advertisements should not state or imply that a product is suitable for particular types of consumers unless the promoter has assessed that the product is suitable for that class. The advertisement should be consistent with the TMD for Retail Product Distribution.
Advertisements for complex products that are only appropriate for a limited group of people should not be targeted at a wider audience.
Consistency with disclosure documents
Where an advertisement draws attention to specific product features, the advertisement should be consistent with information contained in any disclosure document (such as a PDS) or consumer insurance contract.
Photographs, diagrams, images and examples
Photographs and images should not contradict, detract from or reduce the prominence of any warnings, disclaimers or qualifications.
Graphical presentations should not be ambiguous or overly complicated.
Nature and scope of financial advice
Advertisements for a financial advice service should not create unrealistic expectations about what the service can achieve.
Overview of media-specific guidance
ASIC also provides guidance on some media-specific issues for advertising financial products, financial advice services.
Mass media
Promoters should consider the actual audience that is likely to see the advertisement and whether the advertisement is accurate, balanced and helpful for that audience.
Advertising should be clearly distinguished from normal program or editorial content.
Audio advertisements
Warnings, disclaimers and qualifications should be read at a speed that is comprehensible to an average listener.
Film and video advertisements
Information about risks and any warnings should be easily understood by an average viewer on the first viewing of an advertisement and not undermined by distracting sounds or images.
Internet
Promoters should consider the overall impression created by an internet banner advertisement when viewed by itself for the first time.
Promoters should consider the appropriateness of using new media channels for advertising if content limitations mean there is insufficient space to provide balanced information.
Consumers should be able to keep a record of an advertisement, including any disclaimers or warnings
Outdoor advertising
Promoters should take into account the conditions under which an advertisement will be viewed (e.g. from a distance or from a moving vehicle) when considering whether the overall impression of the advertisement is misleading or deceptive
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