Legal and Regulatory Considerations - Financial Services Marketing

After pharmaceuticals, financial services are probably the most highly regulated of all industries when it comes to advertising. Like all advertisers, financial services companies must comply with general advertising guidelines prohibiting advertising that is untruthful, deceptive, or unfair. But financial advertisers have many additional regulatory requirements—mandated by the federal government (such as the Federal Trade Commission and the Securities and Exchange Commission), industry associations (the National Association of Securities Dealers, the New York Stock Exchange), and various departments within each individual state (state banking department, attorney general’s office, insurance office). In fact, financial services may be the only industry in which some advertising is prohibited altogether: for example, the SEC has fined hedge funds that advertise in consumer publications.

What can happen if a financial services firm runs afoul of these laws? Fines, substantial penalties, and potential lawsuits. For example, a bank was sued under the federal Truth in Lending Act for advertising “no annual fee,” and then charging such a fee six months later. The court ruled against the bank, despite other language in the ads giving it the right to change terms. For marketers, the severity of regulation means a lot of small print in advertising. (But not too small—Rule 420(a) of the Securities Act mandates that all copy, including footnotes, be in “roman type at least as large and as legible as 8-point modern type.”) It also means reviews by legal and compliance officers, sending marketing copy to Washington, D.C., for preapproval, and generally a lot of interference with what the creatives want to do.

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