ASIC’s Focus on Fund Advertising and Disclosure

Are you a responsible entity of a fund? Are the advertising and disclosures relating to your fund clear, comprehensive and accurate? Could your advertising and disclosure be considered false or misleading?

As a result of the greater financial risks presented by the COVID-19 pandemic, ASIC has focused its attention on fund advertising and disclosure.  As a part of its focus, ASIC has warned responsible entities (REs) about ensuring that their products are true to label, and to ensure that marketing and website advertising provides clear, balanced and accurate information.  

ASIC’s warnings come after the regulator carried out a risk-based surveillance and identified that a number of funds were providing inadequate information or were not accurately and clearly presenting key features of their funds.

In particular, ASIC was concerned about: 

  • Unbalanced comparisons – where advertisement emphasised higher returns without giving a balanced assessment of key differences and risks; 
  • Safety and stability representations – downplaying risks despite underlying assets being subject to considerable risk and market volatility; and 
  • Withdrawal representations – giving investors the impression that money can be withdrawn on short notice, where liquidity of the fund assets does not support the claim.

ASIC also flagged that REs need to accurately represent features of their product throughout the economic cycle.  REs need to exercise diligence when making disclosures that might give the impression that capital is safe or that withdrawals will be available at short notice, especially in the current environment.

Advertising good practice

REs should take the time to consult Regulatory Guide 234: Advertising financial products and services (including credit): Good practice guidance (RG 234) prior to promoting funds.  RG 234 sets out good practice guidance to help financial product promoters comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct.  In particular, REs should consider the following guidelines set out in RG 234:

  • Returns, features, benefits and risks – Disclosure should give a balanced message about the returns, features, benefits and risks associated with the product.  Benefits should not be given undue prominence compared with risks.
  • Comparisons – Comparisons should only be made between products that have sufficiently similar features or the differences should be made clear.
  • Warnings, disclaimers, qualifications and fine print – Warnings, disclaimers and qualifications should have sufficient prominence and not be inconsistent with other statements including any headline claims. 
  • Photographs, diagrams, images and examples – Images should not contradict, detract from the prominence of any warnings, disclaimers or qualifications. In addition, they should not be ambiguous or overly complicated.

How we can help

Hamilton Locke’s Funds and Financial Services Team is experienced in providing high quality advice on regulatory matters.  We assist REs comply with legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.  

For more information, please contact Justin Gross, Samuel Jones or Jack Peterson

The information contained in this article is for information purposes only and does not constitute legal advice.