FMA issues new guidance for advertising of financial products

5 Nov 21

The Financial Markets Authority has recently released guidance to assist compliance with the fair dealing provisions of the Financial Markets Conduct Act 2013 when advertising offers of financial products.

Part 2 of the Financial Markets Conduct Act 2013 (Act) requires fair dealing in relation to all financial products. These fair dealing provisions prohibit conduct that is, or may likely be, misleading or deceptive as well as the making of false, misleading or unsubstantiated representations.

The Financial Markets Authority (FMA) has released guidance to assist compliance with the fair dealing provisions when advertising offers of financial products. The FMA has suggested that the following key principles be considered when preparing an advertisement:

  1. Based on all the content of the advertisement, what is the overall impression created when viewed for the first time?
  2. Has all relevant information been included, and is the issuer satisfied that there are no misleading, confusing or deceptive omissions?
  3. Are all claims made in the advertisement able to be substantiated?

Whether or not an advertisement is intentionally misleading or deceptive is irrelevant to whether a breach of the fair dealing provisions has occurred. Therefore, it is essential that advertisements be reviewed in light of both the Act and the FMA’s guidance prior to publication.

The FMA has also provided specific guidance for advertising of regulated offers (offers to retail investors) on platforms where the format of content is limited or restricted (such as social media platforms. Additional requirements apply to advertising of regulated offers under Part 3 of the FMCA.

The FMA has clarified that for regulated offers where content restrictions exist, it may not be possible to include the prescribed disclosures on the advertising platform but all required disclosures should prominently feature on the landing page and the messaging should be consistent with the initial advertisement and the landing page linked to the advertisement.

It is the overall impression that counts

The “overall impression” that is created by an advertisement, when viewed for the first time, must be one of truth and accuracy. This is measured from the perspective of an “ordinary and reasonable” (or typical) member of the advertisement’s actual audience.

To ensure that the impression created by an advertisement is not misleading, advertisers should use plain English, ensure all claims are substantiated, performance forecasts are not overestimated, take care when comparing different products and clearly disclose fees and costs.

Advertisements should also be consistent across different communication channels, and warnings and disclaimers should be prominent.  Advertising should be discernible from other content.

Where an offer is only available to wholesale investors, the advertisement must make it clear that it is not available to retail investors.

Omissions can be misleading, deceptive or confusing

The FMA’s guidance reaffirms that misleading, deceptive or confusing advertising extends beyond positive actions and statements – it also include omissions. Failure to properly disclose important information (whether deliberately or inadvertently) may therefore lead to an advertisement being deemed as in breach of the provisions.

Substantiate your claims

All claims and representations made in an advertisement must be substantiated. The issuer must have reasonable grounds to believe that, at the time of the advertisement, the information within it is able to withstand scrutiny.  Forecasts must be based on reasonable and supportable assumptions. A representation that is unsubstantiated when made, will remain unsubstantiated even if it later turns out to be true or is later substantiated.

The FMA is particularly interested in representations made in advertisements regarding the nature, suitability or characteristics of financial products.

Claims or representations that are true in isolation may, when viewed in the context of an advertisement, paint a misleading or deceptive overall impression. It is important that issuers consider the substantiation of each claim made in an advertisement within its context.

Advertising expectations

The FMA has also provided specific expectations for key focus areas where they consider poor conduct is likely to present a higher risk to investors.  The expectations include:

  • To take care when comparing different products – only make direct comparisons between financial products that have sufficiently similar features (to ensure the comparison is meaningful);
  • To balance risk and rewards – balance messaging is important to ensure that the overall impression formed by investors is realistic;
  • Not to overemphasis performance at the expense of other material information – past performance does not predict future results and should not be the most prominent feature of an advertisement.


Want to know more?

If you have any questions about the new guidance or advertising requirements for financial products more generally, please contact Ben Johnston or Kelsi Mosley of our specialist Commercial Team.

PDF version: here.