The proposed changes to the General Code of Conduct (GCoC) published during November 2017 applies to all authorised Financial Services Providers (FSPs), Key Individuals and Representatives and any changes will therefore have a direct impact on FSPs.
Although the proposed amendments have not yet come into effect, they cover several areas. This article aims to assist FSPs to plan and be prepared when the provisions come into effect. A brief overview of the proposed changes to Advertising, relevant to FSPs that advertise their business and services is provided.
The GCoC has always contained provisions relating to advertising, but these requirements have now been extended and aligned to the requirements set out in the new Long-term and Short-term Insurance Policyholder Protection Rules. The objective is:
- to raise the standards for advertising and marketing to ensure good outcomes for customers and to avoid misleading information and creating unrealistic expectations, and
- for FSPs to follow a transparent and fair process so that clients can make informed financial decisions.
Overview of the proposed changes to Advertising requirements
- The Key Individual must have a documented process and procedure to approve advertisements;
- Where the advertisement is not in line with principles in the FAIS GCoC, it must be corrected or withdrawn and the FSP must notify anyone who the FSP knows to have relied on the advertisement;
- Advertisements must be factually correct, clear, accurate, balanced, and not misleading;
- Where all information cannot be included in the advertisement, the advertisement must indicate where and how the additional information can be accessed;
- Information on the advertisement must be prominent and proximate enough so as not to mislead the client;
- Advertisements must use plain language;
- FSPs have to keep a record of all advertisements for at least 5 years after publication;
- Negative option marketing is not acceptable;
- Where comparative marketing is used, the comparison must take into account comparable characteristics across the financial products and the financial services;
- Endorsements and testimonials must be based on genuine opinion and actual experience – ie. they must not be made up.
The changes listed above are still in draft format and the registrar is considering input from industry. Masthead has submitted commentary on the proposed amendments to the GCoC.
Once the final amendments have been published, FSPs will have to review their existing policies and procedures relating to advertising and ensure that they are aligned. We also recommend that FSPs remember to take the Long-Term and Short-Term Insurance Policyholder Protection Rules into consideration.