The NSSMC clarifies. How advertising is arranged in the capital markets and commodity markets

Advertising in the financial sector is strictly regulated. Legislation sets a number of conditions and requirements for it, since such advertising is usually directed at private individuals with the aim of stimulating their investment intentions. Next, we will consider in detail what advertising is in the capital markets, what requirements it must meet and who controls its veracity.

Advertising on capital markets is regulated by legislation. The norms that are important to take into account are contained in the following documents:

• Law of Ukraine on Advertising;
• Law of Ukraine on State Regulation of Capital Markets and Organized Commodity Markets;
• Law of Ukraine on Non-State Pension Provision;
• Law of Ukraine on Financial Services and State Regulation of Financial Services Markets;
• Regulations on Advertising, approved by the Resolution of the NSSMC dated January 22, 2013 No. 63.

They contain definitions of terms, list types of advertising, set requirements and restrictions.

Definition of advertising. Broad and narrow understanding

In a broad sense, the legislation defines that advertising is information about a person or a product, distributed in any form and
in any way and is intended to form or support the awareness of advertising consumers and their interest in such a person or product.

In a narrower sense, advertising is considered depending on the specific field of application.

Advertising of financial instruments, capital markets and organized commodity markets shall be deemed to be information disseminated in any form and in any form about:
– UCITS;
– securities that are issued or in circulation;
– goods and services offered by a professional participant of capital markets and organized commodity markets;
– goods and services offered by the self-regulatory organization of professional capital market participants;
– services of an authorized rating agency;
– derivative contract.

At the same time, it is not an advertisement of financial instruments, capital markets and organized commodity markets:
– information that, in accordance with the law and regulatory legal acts of the NSSMC, is subject to mandatory disclosure;
– information provided by a professional participant of capital markets and organized commodity markets to his client or potential client in the course of such participant’s activities;
– generalized informational and analytical materials and statistical data on the state of capital markets;
– information on financial instruments admitted to trading on the organized capital market, which is made public by the operator of such a market.

Who can act as an advertiser

Let’s start with the fact that an advertiser is a person who is a customer of advertising for its production or distribution.

When we talk about capital markets and organized commodity markets, here the legislation clearly defines who exactly can be an advertiser of a particular financial instrument, service or organization.

General requirements for advertising

✅ must be taught in the state language;
✅ must be clearly separated from other information so that it can be identified specifically as an advertisement;
✅ advertising submitted in the form of author’s or editorial material must have a special mark on the Rights of Advertising or be placed under the heading «Advertising»;
❌ hidden advertising is prohibited (this is information about a person or a product in a program, broadcast, publication, if such information serves advertising purposes and can mislead people about the real purpose of such programs, broadcasts, publications);
❌ it is prohibited to advertise activities or goods that are subject to the need for licensing or obtaining a permit, but do not have a corresponding document.

Specific requirements for advertising

Advertisement of securities must contain information on the registration of the relevant issue of securities specified in the certificate of registration of this issue.

The following requirements do not apply to radio advertising.

Advertising of UCITS must contain information about the presence of a certificate of entry of such institutes into the Unified State Register of UCITS, which confirms the right to conduct activities in the field of joint investment, indicating the number of the certificate, the date of its issuance, and the term of operation of the UCITS.

Advertising of goods and services of professional participants of capital markets and organized commodity markets must contain information about the existence of a license that confirms the right to carry out the relevant type of activity on capital markets and organized commodity markets, indicating the series and number of the license, its date of issue and term of validity, name authority that issued the license.

Advertising of goods and services of self-regulatory organizations of professional capital market participants must contain information on the existence of a certificate of registration of a self-regulatory organization of professional capital market participants, indicating the number and date of issuance of the certificate.

Advertisements for the services of authorized rating agencies must contain information on the availability of a certificate of entry into the State Register of authorized rating agencies, indicating the number and date of issuance of the certificate.

When ordering the production and distribution of advertisements for financial instruments, capital markets and organized commodity markets, advertisers are prohibited from:
• indicate the amount of income expected to be received from financial instruments (including the results of extrapolation forecast), and make forecasts regarding the increase in the value of financial instruments (except financial instruments with fixed income);
• advertise securities before the approval of the securities prospectus in accordance with the legislation on capital markets and organized commodity markets and regulations of the National Securities and Stock Market Commission;
• advertise derivative contracts concluded on the organized capital market, before registration of the specification of such derivative contracts in accordance with the legislation on capital markets and organized commodity markets, as well as regulations of the National Securities and Stock Market Commission;
• use information that does not correspond to the securities issue prospectus of the corresponding issue, registered by the National Securities and Stock Market Commission;
• use information about income from financial instruments or the amount of income received by the issuer in the past without reference to the fact that such income or income is not a guarantee of receiving income in the future.

Advertisers are prohibited from taking the following actions when ordering the production and distribution of advertisements for non-state pension services:
• use incomplete or inaccurate information regarding non-state pension services provided by this advertiser;
• use comparative advertising for the purpose of unfair competition by pointing out shortcomings in the activities of persons who conduct similar professional activities in non-state pension provision, regardless of whether such information about shortcomings corresponds to reality;
• provide a forecast or guarantee the growth of incomes of participants of non-state pension provision;
• make gifts (wins) or make a promise of gifts (wins) to potential participants and depositors of pension funds, as well as policyholders with whom a life pension insurance contract has been concluded, or depositors of pension deposit accounts in banks or carry out any other incentive measures that can influence the choice of a particular pension fund (bank, insurance organization) by its potential participant (depositor, insured).

Legal control
Control over compliance with the legislation of Ukraine on advertising, namely advertising on the capital markets and organized commodity markets, is carried out within the limits of its powers by the National Securities and Stock Market Commission. In particular, the regulator establishes requirements for advertising and supervises compliance with legislation.

In case of violation
Unfortunately, it is not rare that advertisers resort to methods prohibited by law in order to attract more attention and the number of customers. The NSSMC carefully analyzes advertising materials and can make a Resolution to stop the distribution of advertising in the following cases:
• advertising violates the requirements of the legislation on advertising;
• advertising is dishonest;
• advertising is hidden;
• an illegal comparison is made in the advertisement.

Special approach: NPF advertising
There is a special requirement for this type of advertising. In advance, before release, advertising materials must be submitted for consideration and the adoption of a corresponding Resolution to the NSSMC. The advertiser must submit materials to the regulator no later than 10 working days before their distribution.