Investment Business - Advertising Code of Conduct (June 2010)

Summary

This Code, issued by the Bermuda Monetary Authority under section 10 of the Investment Business Act 2003, sets standards for the form and content of advertisements that invite persons to acquire or dispose of investments, or that are calculated to lead to such transactions. It applies to all holders of an investment business licence granted under section 17 or issued under section 87(2) of the Investment Business Act 2003. Non-compliance is taken into account by the Authority when assessing whether a licensee's business is conducted prudently.

• Truthfulness and fairness: Advertisements must not contain untrue, misleading, or unsupported statements, promises, forecasts, or opinions, and comparisons or performance claims must be fairly presented with appropriate qualifications.
• Past performance and taxation claims: Any past performance claim must state its basis, be accompanied by a warning that past performance is not necessarily indicative of future performance, and be relevant; taxation benefit statements must be appropriately qualified.
• Format and identification: Advertisements must be clearly identifiable as such, must not disguise required warnings, must not imply BMA approval, must identify the issuing investment provider (with address if printed), and must disclose the identity of its licensing body.
• Investment-specific disclosures: Advertisements must specify or explain how to obtain terms and conditions, disclose special risk areas, state prominently if value can fluctuate or is unguaranteed, explain the source and nature of any guarantee, and specify how any stated rate of return is calculated.
• Derivatives risk warning: Advertisements inviting direct investment in futures, options, or contracts for differences must include a prescribed risk warning statement.
• Record-keeping: Investment providers must keep records of all advertisements issued, including issue dates, publications used, and evidence supporting factual or opinion statements made.
• Internet advertising: The Code applies equally to advertising over the internet, and providers may not rely on sophisticated-investor or limited-offer exemptions without demonstrable access restriction procedures.

The Authority does not generally pre-vet advertisements and reviewing one does not bind it to a consistent future view. Failure to comply with the Code's letter and spirit may be raised with the investment provider and factored into the Authority's assessment of prudent conduct under the licensing criteria.

Key obligations

• Advertisements must not contain untrue, misleading, or unsubstantiated statements, promises, forecasts or opinions
• Past performance statements must disclose the measurement basis, be accompanied by a warning that past performance is not necessarily a guide to future performance, and be relevant to the investment offered
• Taxation benefit statements must include qualifications showing what they mean in practice and to whom they apply
• Comparisons with other investments must clearly state and fairly present the basis of comparison
• Advertisements must be clearly identifiable as advertisements and must not imply BMA approval or non-objection
• Advertisements must identify the issuing investment provider, include its address if printed, and disclose the identity of its licensing body
• Advertisements must specify all terms and conditions of an investment, or state how a written statement of terms can be obtained, if only a fair indication is given
• Advertisements must disclose any special areas of risk relating to the investment, such as limited marketability
• Advertisements must prominently state if an investment's value may fluctuate or is not guaranteed
• Advertisements for guaranteed investments must clearly state the source and nature of the guarantee and any factors affecting the investor's ability to benefit from it
• Advertisements stating a rate of return must specify how it is calculated, including any capital reduction element
• Advertisements inviting direct investment in futures, options, or contracts for differences must contain the prescribed risk warning
• Investment providers must keep records of all advertisements issued, including date of issue, publications used, and evidence supporting factual or opinion statements
• The Code must be applied to internet advertising in the same manner as other distribution methods, and providers relying on sophisticated-investor exemptions must demonstrate access-restriction procedures are in place

Applies to

holders of an investment business licence granted under section 17 of the Investment Business Act 2003, holders of an investment business licence issued under section 87(2) of the Investment Business Act 2003, investment providers

Related documents

• This document is made under Investment Business Act 2003