Banking Review

When is comment advice?

ASIC has released a consultation paper on regulating internet discussion sites that operate in the financial services space. The current Policy for Internet Discussion Sites (IDS) has not been reviewed since its inception in 2000. Since then the Corporations Act 2001 and Financial Services Act 2001 have come into force.

Since the policy was created, social media has also reached the masses in a way that was the dream of many a dotcom company back in 2000. How this interactivity, customer’s online researching behaviour and the seeking of information and indeed, advice via online channels will feed into proposed regulations for online providers of forums, blogs and other interactive services will be discovered throughout the ASIC consultation process.

Currently not all IDS are required to hold an Australia Financial Services Licence (AFSL), depending on their nature and business operations. The requirements for onsite disclaimers and the obligations of the providers, distributors and operators of such services is need of review given current customer behaviours.

In a market where customers actively seek information and trust advice provided from a multitude of sources, providing customer driven financial discussions online can be challenging. In a channel where interaction with companies and even other customers is becoming an expectation rather than the exception, the management, monitoring and governance will place increasing demands on financial services companies.

How customers navigate through the online services provided by an IDS under the ASIC policy is interesting. The more savvy customers will seek to identify that a site has an AFSL displayed, but the less savvy ones may not. From a customer perspective, when does comment and opinion become advice in the eyes of customers versus the eyes of the site operator versus ASIC?

The precedent case of ASIC vs Matthews [2001] in NSW leads to the proposition that it is possible that informal commentary about financial products and services on an internet discussion site may amount to financial advice. The case, involving The Chimes online chat forum found that Matthews gave financial securities advice on the now defunct insurer, HIH, despite the informal nature of his chat postings.

The revised policy from ASIC is attempting to provider more succinct demarcations for financial service providers as well as operators and distributors of financial services internet discussion sites. It also aims to provide greater guidance around what can be deemed financial advice by customers participating in such online discussions.

How the final position that ASIC takes on financial services internet discussion forums and how the revised policy will impact the online channel will be interesting. Submissions for comment on the proposed changes to the Internet Discussion site policy close on April 27.