Watchdog to bite industry’s adverts
Fund managersand other providers of financial services may be forced to review all advertising of their products after the Australian Securities and Investments Commission (ASIC) announced it had embarked on a project to reform what it sees as the misleading use of past performance figures in the marketing of financial services.
The project was instigated after ASIC received a string of complaints from consumers about the use of past performance information and after some initial scrutiny by the corporate watchdog highlighted numerous examples of questionable use of performance figures by financial services providers.
While ASIC is remaining tight lipped about any groups that might already have come under investigation, its executive director of consumer protection Peter Kell says the inauguration of the project should serve as a warning to all those who advertise financial services.
“ASIC is concerned to ensure that past performance information is clearly conveyed to consumers. What we are signalling with this project is that we will be looking closely at how this type of information is used in advertising for investments and that we will be considering enforcement action if we find advertisements to be misleading,” Kell says.
The announcement of the project comes after the AXA Asia Pacific Group was forced to terminate or modify a series of print and television advertisements after ASIC deemed the use of past performance figures in the ads to be misleading.
The corporate watchdog imposed an enforceable undertaking on AXA requiring it to reveal how its past performance figures had been calculated, accusing the funds management group of not disclosing in its advertisements that past-performance figures were purely hypothetical and not actual past returns.
ASIC will be consulting with a range of industry and consumer groups as part of the project in an attempt to create more rigorous guidelines for the use of hypothetical past performance figures in advertisements, as well as on the timeframes used for promoting past performance and performance comparisons made between different funds and market benchmarks.
ASIC has also urged financial advisers to educate their clients on the limits of past performance as an indicator of future performance, particularly in periods of great market volatility.
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