What should those of us working in the area of public relations and communications be aware of when helping to promote financial products for our clients?
The question is relevant considering the design and distribution obligations (DDO) under the Corporations Act which are administered by ASIC.
ASIC’s regime regarding how retail funds promote and distribute their products is relevant to the extent that we may provide a conduit between our client (e.g., a managed fund) and the public.
The regime originated in the 2014 Financial System Inquiry (‘Murray Inquiry’) which sought to better align Australia’s financial system with the interests and fair treatment of consumers in the aftermath of the GFC.
The design and distribution obligations are effected for the most part through a fund’s target market determination (TMD) documentation. In so far as we are in the business of raising a client’s profile or helping to promote its financial products, we should be aware of our clients’ compliance obligations.
According to ASIC, issuers and distributors of financial products must take reasonable steps to identify the class of consumers they intend to target, and relevant promotional materials must refer to the PDS as well as a TMD where required.
ASIC’s demand that issuers take a consumer-centric approach to marketing and distribution of their products requires us to be cognisant of our clients’ compliance obligations and be across the specifics of their product documentation.
Example
ASIC placed interim stop orders on a crypto investment manager which prevented it from offering or distributing a number of its funds to retail investors.
ASIC initiated the orders to “protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs”.1 The concern was that the company had not appropriately considered the features and risks of their products in determining their target markets and that the funds were unsuitable for the wide target market as defined in the product’s TMDs.
In this case, interim stop orders were placed for a period of 21 days, during which time ASIC expected the company to take immediate steps to ensure compliance. Failing to meet these demands would result in final stop orders being initiated on the funds, and possible further regulatory action considered.
ASIC advises that, for “a financial product with a narrow target market, the distribution conditions will likely be specific and detailed to reflect the intended distribution method, [whereas for] a financial product with a comparatively wide target market, fewer distribution conditions may be needed.”2
While this example highlights the regulatory requirement that financial products be marketed in accordance with the needs and in the best interests of their users, it also urges us, as communications specialists, to understand our place in the compliance regime.
Consideration of documentation
Communications guru David Meerman Scott says it’s a good idea to include detailed product specs and other valuable data in your communications,3 and we agree. However, in light of ASIC rules, we also think marketers and people doing PR for clients may want to ensure that materials consistently represent the product features issued by the fund.
When our business involves messaging for clients, we need to ask:
- How do the compliance obligations under the ASIC regime extend to materials we generate and communicate on behalf of our clients?
- Are our materials consistent with those of the client’s in representing its product features and target markets?
- How do we approach a fund’s TMD when posting to a general audience via social media channels?
It is also worth noting that whereas many products such as managed funds and superannuation “choice” products come under the regulatory scheme, others are already adequately covered by legislation and are therefore exempt, including MySuper products and certain private trusts.
For more information see:
RG 274 Product design and distribution obligations
RG 234 Advertising financial products and services (including credit): Good practice guidance
Corporations Act 2001
Sources:
1. ASIC, ’22-278MR ASIC places interim stop orders on Holon crypto funds’ (17 October 2022), https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-278mr-asic-places-interim-stop-orders-on-holon-crypto-funds/
2. ASIC, ‘RG 274 Product design and distribution obligations’ (11 December 2020), https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-274-product-design-and-distribution-obligations/
3. David Meerman Scott, The New Rules of Marketing and PR: How to Use Content Marketing, Podcasting, Social Media, AI, Live Video, and Newsjacking to Reach Buyers Directly, 7th ed. (Wiley, 2020), 335.
Chris Hocking
Mobile: 0418 603 694
Email: chris@chstrategies.com.au