This week, the Financial Markets Authority (FMA) released a guide to talking about money matters online.
Discussion on a range of financial topics such as money, budgeting, investing and spending have been increasing over the years. However, the line between talking about these topics can sometimes cross into the territory of providing financial advice, which is a regulated area subject to strict rules in New Zealand.
Also for consumers, it’s becoming more important to know whose views are reliable and regulated in what appears to be a sea of endless online advice and commentary these days.
Who needs to read it? Why?
The FMA’s guide will be relevant to all persons and businesses with an online presence discussing financial topics (e.g. online investment platforms and social media channels) and consumers of their online content.
It sets out what may or may not be considered financial advice as well as tips for providers and consumers of such content.
What does it cover?
Key messages in the guide for online content creators talking about financial topics are as follows:
- keep discussions general and don’t get into recommending particular products or telling individuals what products they should or should not take up;
- it’s fine to share factual information describing a financial product’s features or terms and conditions;
- stick to social media best practice including, following New Zealand’s Advertising Standards (for example, see here), disclose all paid and/or gifted posts, moderate comments made on your posts;
- put the customer first and consider if your audience may include vulnerable people;
- don’t promote a product that you don’t understand and be extremely cautious about promoting high risk products like cryptocurrencies and derivatives; and
- remind consumers of your content to seek financial advice from an FMA licensed financial advice provider.
The FMA set out the following as examples of what is likely to cross the line into regulated financial advice:
- This would be OK: “ABC Banks’ Credit Card has retail rewards points that earn you ten points for every dollar you spend.
- But this would likely cross the line: “ABC Bank’s credit card with retail rewards points is the best credit card out there and you should get one.
- This would be OK: “Rather than trying to pick individual shares, you can put your money into a managed fund that will be able to buy a range of investments.”
- But this would likely cross the line: “ABC Finance has a great managed fund that buys shares from around the world, they have low fees, so take your money to them.”
- This would be OK: “If you’re getting close to retirement, considering moving your KiwiSaver into a conservative fund could be a good idea.”
- But this would likely cross the line: “ABC’s Company has a great conservative fund that has performed really well. I recommend moving your KiwiSaver to them if you’re getting close to retirement.”
- This would be OK: “Governments are rolling out COVID-19 vaccines, so tourism companies and airlines could be good investments.”
- But this would likely cross the line: “Buy ABC campervan shares now, the tourism boom is about to start.”
Our view
We welcome the FMA’s guide as a simple way for online content creators and consumers of such content to understand the basics of financial advice and what’s allowed and not allowed.
The FMA’s examples of content that may cross the line into regulated financial advice are also useful guidance for all financial services businesses as to what is and what is not advice. These lines may not always be clear. At a minimum, the content should be tested against section 431C of the Financial Markets Conduct Act 2013 (FMCA) which provides the definition of financial advice and regulated financial advice. But note there may be applicable exclusions from the definition of financial advice and regulated financial advice under Part 2 of Schedule 5 of the FMCA.
Moral of the story if you’re a content creator that is not a licensed financial advice provider – don’t post content if you’re unsure whether it is financial advice or not. Get the content looked over by a legal adviser and avoid the ramifications that could arise from holding yourself as a financial adviser (e.g. as an individual, you could be liable for a penalty of up to NZD200,000).
What next?
If you have any questions in relation to this guide, or the financial advice regime in general, please contact one of our experts.
