ASIC takes aim at banks and insurers

The Australian Securities and Investment Commission (ASIC) has “raised concerns” over the advertisement of ‘low risk’ products offered by Commonwealth Bank (ASX: CBA) and HSBC Australia.

The corporate regulator has labelled the advertisement of complex financial instruments for retail customers as “inappropriate” and “potentially misleading”. The CBA was pulled up for its “protected loan” product which advertised as a win-win for the customer who borrows money to purchase shares.

It stated the customer could “walk away with no loss” but ASIC has said that it was misleading because it did not consider costs of the loan and protection.

HSBC said term deposit customers could get better returns through exposure to financial markets in a ‘low risk’ investment. ASIC said the “statement was inappropriate and potentially misleading due to the risk of capital loss with certain HSBC structured products being promoted”.

According to the Sydney Morning Herald, ASIC is taking aim at Woolworths’ (ASX: WOW) car insurance products for similar advertisement issues.

This follows as ASIC said last month it was monitoring the banks for advertisement used under a “multi-branding strategy” that could potentially mislead customers. These advertising campaigns take advantage of customers’ lack of understanding that smaller banks are sometimes owned by one of the big four, although their advertisements would suggest otherwise.

The CBA currently owns BankWest, Westpac (ASX: WBC) owns RAMS, St George, Bank of Melbourne and Bank SA and NAB (ASX: NAB) owns UBank.

Recently, ASIC targeted Suncorp’s (ASX: SUN) life and general insurance businesses, which resulted in a refund of almost $23 million and forced it to make changes to its compliance system for popular insurances brands, which include AAMI, APIA, GIO, Suncorp, Shannons and Vero.

Foolish takeaway

Our banks and biggest insurers are often forced to use tricky advertising campaigns when they begin to feel the squeeze of slowing growth. The companies above all primarily do business on local soil and are at the top of their industries. Growth for these companies is difficult unless we see a dramatic drop in their prices for one-off events. However, for income and safety, many investors happily pile money in our biggest blue chips and arguably any portfolio should have consistent ‘core’ stocks that form the back bone of their stock market exposure. The most important thing is to buy at the right price.

In the market for high-yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!