Crackdown on celebrity finance endorsements

Celebrities such as Sir Colin Meads and Richard Long who advertise finance companies would risk huge penalties under a proposed law change.

Celebrities who advertise financial products would be at risk of big financial penalties under proposed changes to securities law.

The proposed changes, announced today by Commerce Minister Simon Power, increase penalties for those who make misleading statements about securities, including celebrities who go on camera to endorse them.

Mr Power said under the liability regime, anyone who makes misleading statements in a product disclosure statement or advertisement will be liable for a civil pecuniary penalty of up to $1 million, and $5 million for companies, plus compensation orders.

“This means celebrities who make false or misleading statements on behalf of providers of regulated financial products or services will be subject to significant liability.

“They will not, however, be prohibited from endorsing a financial product or face liability if the product fails and they have not made a misleading statement about it.

“Cabinet considered whether or not to introduce specific regulation for celebrity endorsements, but decided that the proposed liability regime will sufficiently penalise celebrities for any misrepresentations they make.

“This is an extremely difficult area to address, and I would welcome submitters' comments on the proposals once the bill is released for public consultation, and look forward to seeing what the select committee makes of it.”

Earlier Cabinet decisions on securities law include: regulating financial products, disclosure requirements, exemptions, collective investment schemes, and providing the Financial Markets Authority with additional powers.

“This ongoing review is a once-in-a-generation opportunity to modernise our securities laws,” Mr Power said.

“The new legislation will be better for mum and dad investors as well as for New Zealand companies looking to raise capital. It will provide clearer, more consistent information for investors, and clarify obligations that issuers have to meet.

“The modernisation of securities legislation will provide New Zealand with the robust legislative framework that our financial markets need. The Financial Markets Authority, which began work on 1 May, will be able to enforce a modern securities regime that provides clear rules for all participants."

A working draft of the new securities legislation will be released in August for public consultation and a bill will be introduced to Parliament before the election.
 

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