Company directors and management can be held liable for false claims and promises made in advertisements and promotions but problems can be easily avoided.

The Financial Markets Conduct Act 2013 (FMC Act) governs how financial products are created, promoted and sold, and the responsibilities of those who offer, deal and trade them.

The FMC Act was passed in  September 2013 and was amended in 2019 to incorporate the regulation of financial advice.

Further changes are also being proposed to the FMC Act to regulate the conduct of banks, insurers and non-bank deposit takers.

The Financial Markets Authority's director of Investment Management Paul Gregory says improper advertising can be a major source of potential harm for the general public especially in the advertising of complex products and the use of jargon, fine print and the terms and conditions attached to those products.

He says social media algorithms and the use of behavioural science can be particularly potent.

However, he says if advertisers follow three simple principles they can avoid any issues or complaints from a fair dealing perspective.

Overall impression - it's the first impression that counts, not the impression made after following an advertisement to a website or other supporting information.

Omissions are also key and can't be deliberate or even inadvertent. Ads cannot 'cherry pick' data and must provide context.

The third rule is the claims made in ads must be able to be substantiated and proven when an ad is made, so can't be substantiated after the fact.

"Advertisements should not say a financial product is safe, it's risk-free or low risk," says Gregory.

"Don't overemphasise performance, short periods are problematic...and costs should be fully disclosed."

The FMA can issue a stop order for an advertisement if it feels it is misleading, confusing or contains false claims. It does not need a court order for this and a failure to comply could result in a fine of up to $300,000.

It can also issue a direction order asking an advertiser to make changes to an advertisement and can also take court action for serious breaches.

"Ultimately, financial product providers and the FMA want the same thing.

"If investors and customers are treated fairly, issuers benefit, the market benefits, the economy benefits and that benefit is sustainable."