MFSA notes increase in use of gifts, prizes, and lotteries in financial promotions

The Malta Financial Services Authority (MFSA) has identified a number of misleading financial marketing practices in its 2023 report.

The Authority’s latest edition of its series “The Nature and Art of Financial Supervision” outlines the results of the monitoring conducted in 2023.

The MFSA reviewed 359 social media adverts issued by investment firms, insurance undertakings, and credit institutions. Of these, 40 cases required further clarification, with 30 resulting in amended adverts, and one case resulting in the withdrawal of the marketing communication. The main findings requiring the Authority’s intervention were related to missing information, misleading communication on the nature and the features of the product, missing disclaimers and/or risk warnings, and misleading use of gifts, rewards, or other incentives.

Additionally, the MFSA reviewed 35 websites, identifying common issues such as incorrect or incomplete information about EU operations, licensing statements, target audiences, and complaint procedures. The report noted an increase in the use of gifts, prizes, and lotteries in financial promotions, emphasising their potential to mislead consumers. The MFSA also observed a rise in the promotion of Insurance-Based Investment Products (IBIPs), with terms like “guaranteed” being used without sufficient disclosures about the nature and limitations of such guarantees.

While the publication of such adverts does not require pre-approval from the MFSA, it reminded licensed entities that their marketing communications must adhere to applicable regulatory requirements. When the Authority identifies an advertisement that is unfair, unclear, or misleading, it reaches out to the entity in question, requesting adjustments or, in some cases, the withdrawal of non-compliant marketing material until amendments are made.

Sarah Pulis, Head of Conduct Supervision at the MFSA, stated in the release: “The MFSA is committed to upholding the highest standards of transparency and integrity in financial marketing. This publication underscores our commitment to protecting consumers by ensuring that marketing communications are clear, fair, and not misleading. The regulation and supervision of financial promotions are crucial for consumer protection, ensuring that consumers receive the necessary information from the beginning of their journey to avoid being misled into purchasing financial products or services that do not meet their objectives, expectations, and needs.”