The Financial Advertising Code (‘Code’) released by the Advertising Standards Authority (‘ASA’) came into force on 1 March 2022 for new financial advertising, and now applies to all advertising from 1 June 2022. The Code replaces the previous Code for Financial Advertising which was updated last year following a routine review by ASA.
Advertising in New Zealand is regulated by the ASA Codes and its complaints process, working within the regulatory framework provided by numerous Acts and Regulations. There are independent complaint and appeal boards for advertising in New Zealand, administered by the ASA. The majority of stakeholders in the media and advertising sector are ASA members, though membership is voluntary.
The Code applies to all financial advertising and parties to advertisements, including the advertiser, agencies and media. It is important all financial market participants who advertise advertising ‘Financial Products or Services’ are aware of this update, to ensure their current practices comply.
The Code takes into account changes, including amending the definition of ‘Financial Advertising’, and provides greater clarity on its scope as follows:
- The definition of ‘Financial Advertising’ has been amended to “any message, the content of which is controlled directly or indirectly by the Advertiser, expressed in any language and communicated in any medium with the intent to influence the choice, opinion or behavior of those to whom it is addressed and is for the purpose of promoting a Financial Product or Service”.
- ‘Financial Products or Services’ are any product or service relating to insurance, banking, credit, investment, payment services, financial or risk management, foreign exchange or advice or educational services.
- ‘Advertiser’ is any party who controls the content of a published message or broadcast activity, whether directly or indirectly, in order to influence choice, opinion or behaviour.
Further, the Code sets out two principles (Social Responsibility and Truthful Presentation) and supplementary rules that advertisers, agencies and media must follow when advertising Financial Products or Services.
The principle of Social Responsibility is observed holistically and is embodied in the spirit of the Code. Financial Advertising must be prepared and placed with a high standard of social responsibility to consumers and society.
The supplementary responsibility rules under the principle of social requires advertising to be easily understood by consumers. To achieve this, the Code provides the following guidelines:
- All relevant and required information must be disclosed.
- Care must be taken to ensure that key disclosed information is understood in proportion to the importance of that information. Written text must be large and clear enough to be readable. Spoken language must be presented clearly and at a pace able to be understood by consumers.
- Financial advice may only be included in Financial Advertising content from licensed individuals or entities.
- Financial Advertising posted online by entities that are not licensed financial providers, must also comply with the principles and rules in the Code.
- Advertisers and their agents are also responsible for ensuring user-generated comments, reviews, testimonials and endorsements comply with the Code when they form part of the advertisement.
Financial Advertising must be truthful, balanced and not misleading. This principle provides two supplementary rules for Financial Advertisements.
The first rule reiterates Principle 2 of the Advertising Standards Code (‘ASC’), by providing that Financial Advertising must not mislead or be likely to mislead, deceive or confuse consumers, abuse their trust or exploit their lack of knowledge. An important distinction between financial advertising and other advertising however, is that the general exclusion allowing obvious untruths, exaggeration, puffery or deliberate hyperbole, must not be used in regards to financial claims. The content must not take advantage of consumers’ inexperience, lack of knowledge or financially vulnerable situation.
The second rules relates to the use of data. Advertisements cannot use tests, surveys or research results or quotations from technical or scientific literature in a manner which is misleading or deceptive. The full guidelines for this rule are also set out in the ASC. In addition, Financial Advertising must not:
- Portray unrealistic or exaggerated financial expectations or outcomes;
- Provide incomplete information such that the advertising is misleading eg failing to include complete information such as the losses, negatives or risk in any investment; or
- State or imply that Financial Products or Services are safe or free from risk or understate the level of risk associated.
Financial Advertising which uses examples of past performance must make clear this does not reliably indicate future performance. Technical language and statistics are acceptable, provided they are relevant and easily understood by non-expert consumers without specialist knowledge.
The purpose of the Code is to ensure Financial Advertising is presented in a way that demonstrates a high standard of social responsibility. Market need to ensure their Financial Advertising participants discloses fully all relevant information, and is done so in a way that truth represents the Financial Product or Service.
The ASA states it is possible to breach the Code from breaches of the principles or spirit alone. Market participants will need to be mindful of this in the application of the Code, and ensure there are internal procedures in place that monitor Financial Advertising before going public. This includes compliance with the Financial Market Authority’s guidance on advertising offers of financial products, and broader statutory regulation such as the Financial Markets Conduct Act 2013 and Credit Contracts and Consumer Finance Act 2003.