French advertising and marketing authorities set forth criteria to ensure caveats relating to online promotion of leveraged investment products
A set of stringent rules has been published by Autorite de Regulation Professionnelle de la Publicite (ARRP), the French marketing regulator, with the intention of clamping down on the methods by which leveraged investment products, including FX, can be advertised.
The rules, which are set to be implemented before April 23 this year, comprise of a number of criteria which companies advertising FX to retail clients must adhere to, including the requirement to specify clear rates and pricing, be completely transparent and comprehensible, must employ appropriate safeguards for minors and be socially responsible, as well as providing clear data relating to past performance.
An interesting move, therefore, by a regulatory authority which operates outside of the financial markets industry, having singled out the media advertising of leveraged financial products being offered online.
LeapRate today spoke to FX marketing specialist Bart Burggraaf, Managing Director & Partner at MediaGroup London, to ascertain his perspective on this move by the French authorities: “As I understand it the new regulation’s main points are making it mandatory to be transparent about pricing, have risk warnings and mark itself as an advertisement.”
“On the one hand making advertising talk about risk and pricing more clearly makes a lot of theoretical sense from a consumer stand point. However, in an ideal world qualified investors should understand the risks of whatever they are investing in themselves; more disclaimers and warnings is not the answer – with all the small print, disclaimers and legalese I find it hard to believe traders will pay much attention to them” continued Mr. Burggraaf.
“Regardless of your stance of having them in the first place, I think having these warnings and disclaimers in advertisements is the least favourable option; often creative space is too small to do something meaningful and will make advertising less effective. I think it makes much more sense to do these warnings at the point of conversion (i.e. a live account signup) as putting money on the line, in my opinion, is the appropriate point to make all warnings known.”
Certainly, the ARRP’s intention is to place greater caveats in front of potential clients before they act on the advertisements placed on websites. Mr. Burggraaf concluded by explaining to LeapRate that “When it comes to being transparent about pricing; a good broker will do that anyway as it’s in their best interest but I could see how some consumer protection makes sense here. Same with marking advertisements and advertorials as commercial content.”
Caveat Emptor, as they say…..