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Do not tick off the regulator: The role of the humble checklist – Financial Services



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Misleading and deceptive advertising has been an enduring area
of focus for ASIC – and a minefield for the licensees involved. We
often remind our clients that ASIC regularly monitors the
advertising of financial products and services, and that it has
taken an active role in pursuing licensees about messaging that may
have failed to present a balanced picture.

Just a couple of recent examples are:

  • ASIC taking action against La Trobe Financial
    Asset Management in relation to false and misleading advertising of
    the La Trobe Australian Credit Fund. ASIC’s action related
    partly to statements in the relevant advertising that any capital
    invested in the Fund would be ‘stable’. This created the
    impression that there could be no loss of capital. The Federal
    Court ordered La Trobe to pay a penalty of $750,000.

  • An
    ASIC
    action against companies in the Mayfair 101 Group, which
    resulted in the Federal Court ordering a penalty of $30 million
    across four of those companies. In this matter, financial products
    such as fixed income notes were advertised across newspapers, on
    websites and via Google, when potential investors used search terms
    such as ‘bank term deposits’ and ‘best term
    deposit’. This conveyed a misleading message that the relevant
    products were low risk. It should be noted that the Federal
    Court’s decision is now the subject of an appeal by the Mayfair
    101 Group.

These cases illustrate how careful licensees need to be with the
drafting and approval of marketing or promotional material. This
can present a challenge where there is a high volume of material
being published across various platforms, or if you’re in a
rush to get the message out there to promote a new product or
service.

You probably have some idea of the types of things to look out
for, but a good checklist can help ensure nothing is overlooked.
For example, you may know that you need to have a reasonable basis
for every claim being made, and you recall that you’ll probably
need a general advice warning, but will you remember the rules
around restricted terms such as ‘independent’? Are any
claims about product features consistent with your disclosure
documents? Is the advertising targeted to the right audience?

In our experience, some licensees will ask product or marketing
teams to apply a checklist to the first draft of promotional or
marketing material. This can help pick up on common issues before
the next draft is submitted to a compliance or legal team for final
approval. This provides multiple opportunities for the
identification of risky messaging or missing content and saves time
on the final review.

Many of the issues dealt with in our HN Hub promotional material checklist will
also be relevant to the preparation of various disclosure
documents, such as a PDS or FSG. While these documents are not
marketing material, they often include various statements designed
to promote the licensee and its services. It’s just as
important to ensure that every statement is accurate, and not
misleading. (However, we also have checklists that focus more
specifically on the prescribed content requirements for common
disclosure documents.)

The consistent use of appropriate checklists can also help
demonstrate that your licensee has suitable compliance systems and
procedures in place. These tools form one practical element of your
overall compliance framework. However, it’s key to ensure you
review checklists to make sure they remain up to date and suitable
for their purpose. Otherwise, their repeated use will quickly
become a source of risk. Our team can save you time on this, since
we periodically update the checklists we make available on the HN Hub.

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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