Don’t tick off the regulator: the role of the humble checklist

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Zoe Higgins Previously a Special Counsel at Holley Nethercote Linkedin

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.

In addition to our promotional material checklist, subscribers can access a number of others that will promote consistency and save you from re-inventing the wheel in a range of areas.  Get in touch for more information.

Author: Zoe Higgins (Special Counsel)

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