The Financial Services Council has recommended ASIC should expand the definition of a “promoter” in its guidance on advertising financial products and services to include lead generators.
ASIC launched a consultation on Regulatory Guide 234 Advertising financial products and services (including credit) late last year simultaneously with other guides.
The FSC submission on RG 234 says the inclusion of lead generators should acknowledge that their activities are both a form of advertising and part of the product distribution chain.
“In order to address recent misconduct, ASIC could expand the definition of ‘promoter’ to explicitly include paid or incentivised lead generation, referral and introduction services,” the submission says.
The FSC recommendation follows the $1 billion collapse of the Shield and First Guardian master funds which relied on a pipeline of referrals from lead generators who often received a cut of the advice fees charged by financial advisers.
RG 234 was published in November 2012 to offer guidance for the “promoters” of financial products, financial advice services, and credit products and services in fulfilling their legal obligations and to avoid engaging in misleading or deceptive conduct when advertising such products and services.
The updated RG 234 includes guidance and examples of ASIC’s enforcement activities since the original publication.
The updated guidance also incorporates Regulatory Guide 53 The use of past performance in promotional material, and ASIC plans to withdraw that guidance when RG 234 is officially updated.
ASIC said the 59-page updated guidance – which was released without a consultation paper – would largely be unchanged instead releasing a three-page summary of changes that highlighted the clarifications made.
The regulatory guide covers the application of industry awards, use of performance figures, use of industry jargon and certain words and terms, and how fees are described.
The guidance sets out that when an award is used as an advertisement for a product that the grantor of the award should be “clearly identified and the award explained” and that the advertisement should make clear if it is granted by someone related to the promoter.
The regulatory guide has already been used by ASIC as a reference for enforcement of so-called “finfluencers” – social media or digital media content producers who focus on finances and financial products – but the new guidance adds specific references to the term.
However, the FSC argues that further guidance should be provided for the use of social to prevent ambiguity in regulatory expectations by including examples like whether a LinkedIn post promoting a business’ services or capabilities requires an information disclaimer when no product is mentioned.
Furthermore, the FSC advocates for guidance that covers whether the publication of wholesale product information is permitted on social media platforms, if there is relevant disclaimers, warnings and appropriate use of targeted marketing.
