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Do you have a handle on your financial advertising?

Friday 13 November 2020

 


Financial advertisements are an area that the Australian Securities and Investment Commission (ASIC) has its eye on. 

Earlier this year, ASIC commenced proceedings against Allianz Australia and AWP Australia for misleading behaviour around the sale of travel insurance. Similarly, Colonial First State found itself in the regulator’s sights, after being accused of misleading communication with members over their FirstChoice Funds.

At the time of writing this article, ASIC has just announced they have secured $10 million in remediation from Allianz Global Assistance and AWP Australia who ‘potentially mis-sold travel insurance 31,500 customers.’

ASIC’s Acting Chair, Karen Chester, said, “Insurers need to be careful to make sure they don’t mislead consumers into thinking they have insurance cover for something when they don’t.”

But what is RG234?
Recently, the GRC Professional Podcast caught up with Strategic Stakeholder Consultant Carole Fergusson, our special guest for the 101 series that has looked at the fundamentals of complying with regulatory guides. 

“It is very important,” said Ferguson, “that if you are going to undertake that type of advertisement, you’ve actually got to focus on the question of ‘can we actually do products or is television just for brand awareness?’”

Ferguson argued that, in some cases, it might be safer to make advertising about brand awareness rather than product promotion to consumers.

“As we know, consumers rely on a variety of media to determine what kind of financial products they are going to go into, and it’s very important that the promoters of the product actually abide by certain guidelines to ensure they are not misleading or deceiving customers into acquiring financial products.”

Ferguson reiterated that messaging must be clear so that it does not mislead or deceive consumers into thinking the product is something other than what it is. 

“Make certain your marketing people know that you must sign off on every advertisement,” she explained. “It needs to be referenced back to the PDS [product disclosure statement] to make sure that nothing is being said in the advertisement that contradicts or augments what’s in the PDS.”

This means making sure the advertising company has clear guidelines of what can and cannot be said. 

GRC Institute Managing Director Naomi Burley added that it is important for compliance professionals to actually follow up on whether or not the guidelines have been followed. 

“The ASIC guideline is very clear,” Burley said. “You actually have to include risk - and particularly for certain products, risk is a very important factor.”
 
 
Unintentional breach?
“The bottom line, when you are doing an advertisement - unless it’s in a wholesale industry journal - is that everyone is retail. Because of that, you have to be extremely careful with regards to the types of advertisements you use and the methodology for the delivery of it,” Ferguson explained, adding that there are some financial products that are just not suited for advertising in a ‘train station scenario’ or on social media platforms such as LinkedIn. 

“The banner ads on LinkedIn often don’t have enough space to say ‘please read the PDS’ or that ‘past performance is not an indicator of future performance’.”
 
What to do if you have breached your obligations in this space?
“It is very important that if something does go wrong, then as soon practicable someone must knock on ASIC’s door to say, ‘can we have a conversation?’” Ferguson said. “At the same time, your 912D notice should be drafted so that it is ready to present to ASIC for discussion.”

Ferguson added that the company should engage with their legal department, in order work through the solutions. 

“Given the amount civil penalties, though, and the fact that ASIC is handing out less EUs and more enforceable outcomes, I think it’s really important to think carefully about what you’ve got to do.”
Allianz and AWP addressed their issues by:

  • removing the potentially misleading or deceptive statements from their websites and those of their partners;
  • remediating travel insurance customers whose claims were partially paid; and
  • refunding premiums, with interest, to customers who had purchased travel insurance from Allianz’s own website or those of its partners.