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Amending the rules of advertising – How to keep your ads safe and within legal limits

Advertisements are likely to be the most regular contact consumers have with companies that offer financial services and products. As a financial services provider (FSP) it is therefore important to be aware of what to include in your advertising and what not.

The Financial Sector Conduct Authority (FSCA) has just published the final amendments to the General Code of Conduct for Authorised Financial Services Providers and Representatives under the FAIS Act. The extensive amendments published on 26 June 2020 include changes on the Advertising section as well. “The amendments are necessary to contribute to the fulfilment of the FSCA’s legislated objectives and are ultimately intended to promote the fair treatment and protection of financial customers,” the FSCA said.

Section 14 of the General Code of Conduct contains details regarding advertising principles, requirements and standards.

Some of the more interesting ones, which relate to enquiries we often receive from readers, are included below. It is however important that you familiarise yourself with all the detail, as the section was substituted in totality.

What is advertising and what does an advertisement refer to?

Section 1(1) of the General Code has been amended by the substitution of the definition of “advertisement” with:

” ‘advertisement’ [in relation to a provider] means any [written, printed, electronic or oral] communication [(including a communication by means of a public radio service), which is directed to the general public, or any section thereof, or to any client on request, by any such person, which is intended merely to call attention to the marketing or promotion of financial services offered by such person, and which does not purport to provide detailed information regarding any such financial services; and ‘advertising’ or ‘advertises’ has a corresponding meaning] published through any medium and in any form, by itself or together with any other communication which is intended to create public interest In the business, financial services. financial products or related services of a provider, or to persuade the public (or a part thereof) to transact in respect of a financial product, financial service or related service of the provider in any manner but which does not purport to provide detailed information to or for a specific client regarding a specific financial , product, financial service or related service “.

“The definition is intended to extend to an advertisement relating to the business, financial services, financial products or related services of a provider and therefore any advertisement that intends to create public interest in the business (including so-called “brand awareness” advertising) of the provider,” the FSCA noted in the consultation report.

Key facts about advertising

The Key Individual or a person of appropriate seniority to whom the key person has delegated the approval, must have a documented process and procedure to approve advertisements.
Advertisements must be factually correct, clear, accurate, balanced, and not misleading. According to the FSCA, advertisements that do not fairly represent the product or its key features and risks it can be misleading and create unrealistic expectations that may lead to poor financial decisions and poor customer outcomes. “The new requirements, inter alia, seek to ensure that clients are not subjected to aggressive, misleading, or unwanted marketing and are able to make informed decisions.”
Where it is not practical to include all information in the advertisement itself, the advertisement must indicate that additional information on key limitations, exclusions, risks and charges related to the financial product, financial service or related service being advertised is available.
An advertisement must not criticise or belittle any financial product, financial service, product supplier or provider.
An advertisement must use plain language.
A provider must keep adequate records of all advertisements for a period of at least 5 years after publication.
An FSP must allow the client the opportunity to demand that he or she does not receive any further advertisements through any of the direct mediums.
Advertisements that include puffery, i.e. an exaggerated opinion of quality, must be consistent with the provisions relating to puffery in the Code of Advertising Practice Issued by the Advertising Regulatory Board as amended from time to time
Endorsements and testimonials must be based on genuine opinion and actual experience.
An advertisement that references a loyalty benefit (including so-called cash- or premium-back bonuses in relation to insurance policies) or no-claim bonus must not create the Impression that such benefit or bonus is free. “Clients must be in a position to understand exactly what services they are paying for”.
No projected benefits may be included in advertisements, if the benefits depend on future unknown investment performance, unless used to demonstrate the benefits of savings in general.

It is important that FSPs review their existing policies and procedures relating to advertising and ensure that they are aligned with the latest amendments.

Click here to download Section 14 of the Amendment of the General Code of Conduct for Authorised Financial Services Providers and Representatives, 2003 (GCOC).

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