ASIC warns it will take action when search engines are used in a misleading or deceptive way to entice investors to products they are not searching for.
Australia’s Federal Court has ruled that companies in the Mayfair 101 Group made statements that were “false, misleading or deceptive” in advertisements for its debenture products.
In proceedings brought by ASIC (Australian Securities and Investments Commission) in April 2020, the regulator claimed that Mayfair 101 debenture products appeared as sponsored links on Google AdWords and Bing Ads when a consumer searched online for “bank term deposit” or “term deposit”.
At the time, the court issued interim orders restraining Mayfair 101 entities from promoting their debenture products and prohibiting the use of specific words and phrases in their advertising.
On Tuesday (23 March), the court found that Mayfair Wealth Partners and Online Investments (trading as Mayfair 101), M101 Nominees and M101 Holdings, engaged in deceptive conduct and misled investors by making several false representations.
The court said Mayfair 101’s debenture products exposed investors to significantly higher risk than bank term deposits, yet it was “tolerably clear that the defendants’ marketing strategy was addressed to persons searching for a term deposit in order to divert them to the defendants’ websites”.
Additionally, Mayfair 101 deceived investors by making them believe that their principal investments would be repaid in full on maturity, despite the group’s ability to extend the time for repayment indefinitely.
Mayfair 101 also misrepresented that their debenture products were specifically designed for investors seeking certainty and confidence in their investments, though investors in said products could in fact lose some, or all, of their principal investment. The products “could not on any reasonable view be described as an investment with no risk of default” the judge said.
The court also discovered that Mayfair 101 and M101 Nominees falsely represented that certain products were fully secured financial products, when in fact the funds invested were actually lent to a related party, used to pay deposits on properties, and ultimately not secured by first-ranking, unencumbered asset security.
Commenting on the court win, ASIC deputy chair Karen Chester said the regulator’s success demonstrates that firms need to do the right thing by their investors, even when they are wholesale investors. “They need to make sure they accurately describe their products when advertising.”
Chester also pointed to ASIC’s ‘True to Label’ project, which began in late 2019, and has identified 30 funds that are misleading investors through online advertising, with false claims that certain products involve less risk and that investors could withdraw funds when they wanted.
“This [Mayfair 101] case is a warning that ASIC will not only take action where investments are marketed as safer, lower risk, or more liquid when they are not, but when search engines are used in a misleading or deceptive way to entice investors to products they are not searching for,” she said.
The Mayfair 101 judgment is available here.
ASIC is seeking pecuniary penalties, injunctions and corrective advertising. A penalty hearing is yet to be listed by the court.