ASIC updates guidance on advertising financial products

ASIC has announced proposed changes to Regulatory Guide 234 Advertising financial products and services (including credit): Good practice guidance (RG 234).

RG 234 sets out best practice guidelines to help relevant entities advertise financial product and advice services fairly and transparently, ensuring compliance with legal obligations that prohibit misleading or deceptive conduct.

In summary, the proposed changes seek to:

• set out guidance and examples reflecting ASIC enforcement and regulatory action relevant to advertising conduct undertaken since RG 234 was published;
• consolidate guidance set out in Regulatory Guide 53 The use of past performance in promotional material (RG 53), so that there is one guide that sets out ASIC's guidelines around general advising; and
• reduce complexity and ensure the existing guidance is more concise and user-friendly.

While the changes are of a substantive nature and merit close attention, it is important to note that ASIC is not intending to completely overhaul the existing guidance.

Once RG 234 has been updated, ASIC has indicated it seeks to withdraw RG 53.

The key updates proposed by ASIC include the following:

• outlining and clarifying the meaning of 'financial advice services' and 'credit products and credit services';
• setting out regulatory and enforcement action that ASIC has pursued in relation to advertising conduct since 2012;
• incorporating guidance from RG 53 in relation to the use of past performance in promotional material;
• incorporating guidance from Regulatory Guide 175: AFS licensing: Financial product advisers - Conduct and disclosure (RG 175) in relation to use of restricted language;
• updates examples of advertisement media to include social media and streaming.

Below, we provide a more detailed explanation of the guidance sought to be incorporated by ASIC in relation to the use of past performance data in promotional material.

ASIC makes clear that advertising which contains information about past performance has a greater risk of being misleading if it is presented in a way that:

• suggests it is a projection demonstrating the likely future value of an investment;
• implies that substantially the same returns will be achieved in the future; and
• overly highlights past performance and suggests simple past performance figures should be the sole or dominant method of choosing a financial product or service.

To ensure information about past performance is not misleading, an advertisement for a product with information about past performance should, among other things:

• only be used in advertising where it is relevant and there are reasonable grounds to provide the information;
• draw attention to the fact the past performance is not indicative of future performance;
• include information relating to a relevant and sufficient period (or periods) of past performance to give a balanced indication of past performance;
• include past performance information for standardised periods and such information should be at least as prominent as other performance information; and
• have figures calculated in line with industry standards and common industry practices.

ASIC also sets out suggested wording and examples of future performance warnings that are less likely to be effective.