This action follows ASIC’s recent crackdown on firms selling complex products promoted as having capital protection or a capital guarantee.
ASIC’s review found there was a need to ensure that marketing and advice directed at retail investors is more appropriate and accurate, especially where an investor’s capital was at risk.
CBA’s flyer for its ‘Protected Loan’ compared investing $100,000 directly in listed shares with using a $100,000 Protected Loan to buy the same shares. However, the comparison and accompanying claims about the relative benefits of the gearing strategy failed to subtract the interest costs of the loan, and this may not have been clear to consumers.
Further, CBA’s ads stating Protected Loan customers could ‘walk away with no loss’ at maturity if share prices fell were potentially misleading as the costs of the loan and protection had not been considered. Warnings that outlined returns may be negative because of interest costs were not prominent enough, appearing at the end of the booklets.
HSBC’s website materials for certain structured products were inappropriate as they created the impression the investments were low-risk and comparable to relatively safe investments such as bank deposits, when for some products this was not the case.
HSBC claimed that its structured products were suitable for ‘traditional deposit investors looking for a way to enhance their returns through exposure to financial markets, but are unwilling to put their capital at risk should the market not perform as expected.’
ASIC viewed this statement was inappropriate and potentially misleading due to the risk of capital loss with certain HSBC structured products being promoted.
ASIC Deputy Chairman Peter Kell said ads which created unrealistic expectations about a product’s features or risks were unacceptable.
‘Ads must not be misleading as to a product’s nature or features, and appropriately outline the risks to investors. Our regulatory guidance clearly states the impact of fees and costs should not be hidden or difficult to understand.”