Is conduct misleading even if you don’t mean it?

When you look at ASIC’s enforcement priorities for 2024, it’s clear that ASIC is holding businesses to higher standards of conduct in meeting their compliance obligations.

When you create an ad or a website promotion it’s easy to focus on a catchy headline or promote “unique” benefits or discounts.

Conduct can be misleading or deceptive if it is factually incorrect or a key term is omitted, notwithstanding that you do not intend it to be so, or that you have good intentions.

What happens when a customer complains that the product or service they acquired does not deliver those benefits?

Conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive is an offence under the ASIC Act which can constitute a licence breach as well as automatically be reportable as a significant breach to ASIC, even if the conduct was not intentional.

And it can result in significant penalties.

Legal action for misleading or deceptive conduct is a large proportion of ASIC’s enforcement case load.

The legal test is whether the conduct has a real probability of leading the target customer into error.

It is not necessary that a person has suffered a loss. ASIC can take preventative action.

Conduct that may be misleading can be either mass-market public conduct (such as ads or a website or disclosure documents) or person-to-person conduct.

Misleading conduct can be caused by systemic technological error or human error.

Intent is not relevant. All that is relevant is whether objectively the conduct was misleading or deceptive or likely to mislead or deceive.

Circumstances when communications do not match actual product terms and conditions could include when your advertising of a product is not consistent with the product specifications, when your ad headline is not consistent with the terms and conditions, when you charge fees when they should have been waived or when you pay interest at a lower rate than advertised.

ASIC Regulatory Guide 234 contains good practice guidance to help financial services and credit providers comply with their legal obligations to not make false or misleading statements or engage in misleading or deceptive conduct.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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