Misleading financial advertisements crackdown by ASIC

Boosted by a recent court win by competition regulator ACCC, corporate regulator ASIC is cracking down on misleading and deceptive advertising by financial services firms. Yesterday, the Australian Securities & Investments Commission published a consultation paper in a bid to enforce higher standards. Greg Medcraft, ASIC chairman, said the paper was designed to "help promoters and publishers comply with their legal obligations", a reminder that in some cases publishers also have to check the content of advertising. Included in a list of 21 proposals is a requirement that warnings, disclaimers or qualifications in radio adverts should be read at a speed that is comprehensible to listeners. For film or video ads, those warnings or disclaimers should not be undermined by distracting sounds or images. And in print or internet advertising, warnings or disclaimers should be contained in the advertisement itself and not contained on another page or web page. Mr Medcraft has been a noted opponent of the advertising of Contracts for Difference in prime time television, but that is just one of the things that the consultation paper covers. "An advertisement for CFDs should not include prominent headline claims such as 'Build personal wealth with low-risk trading strategies' and 'safely harness the leverage power of CFDs'," the discussion paper notes, pointing out that CFDs are "high risk products" on which investors can lose far more than their original investments. Furthermore, advertising by banks and insurance companies also come in for criticism for spruiking low fees and premiums without explaining fully the conditions that could apply. ASIC noted a case where a bank had advertised an account as being free of monthly account-keeping fees for customers depositing at least $2000 a month, without explaining clearly that the deal applied only to new accounts. And it highlighted a case where a car insurer had told customers they could "cut car insurance into 12 easy monthly payments" while only revealing in the small print that the total would be greater than for a one-off payment. The example noted that "the strength of the headline claim would be significantly greater than that of the fine print", and that the insurer got a warning to that effect. Between now and October 25, ASIC has invited comments on the discussion paper and accompanying draft regulatory guide. A recent court win by the Australian Competition & Consumer Commission against Optus, in which the phone company was fined $5.26 million, has encouraged the advertising crackdown. The judgment, which concerned broadband advertising, will be appealed.
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