Celebs could face $1m fines for ads

Richard Long said he wouldn't have fronted Hanover's advertising campaign had the regime been in force. Photo / APN

Celebrities who make false statements about financial services could face a fine of up to $1 million under new laws that are being drafted, Commerce Minister Simon Power says.

Some insurance and finance companies use well-known personalities to publicise their services and Mr Power said today it was an extremely difficult area to deal with.

Under the proposed liability regime, anyone who made misleading statements in a product disclosure statement or advertisement could be fined up to $1 million, and companies up to $5m, plus compensation orders, he said

"This means celebrities who make false or misleading statements on behalf of providers of regulated financial products or services will be subject to significant liability," Mr Power said.

"They will not, however, be prohibited from endorsing a financial product or face liability if the product fails and they have not made a misleading statement about it."

Mr Power said Cabinet considered whether to introduce specific regulations for celebrity endorsements, but decided the proposed liability regime would sufficiently penalise them for any misrepresentations they made.

"This is an extremely difficult area to address and I would welcome submitters' comments on the proposals once the bill is released for public consultation," he said.

The new laws will be tough on companies, with penalties ranging from an infringement notice of up to $20,000 for failing to keep registers of security holders to a maximum 10 years imprisonment as well as fines of up to $5m for "known or reckless inclusion of a false statement in a disclosure document".

Richard Long, who fronted One News between 1988 and 2003, promoted Hanover Finance, which in 2008 froze repayments to investors owed $554 million.

Last month Long told the Herald that had such a regime been in force when he was asked to front Hanover's advertising he would not have done it. He believed celebrities would now shy away from such work. "If that's the intent then probably it will work."

However, he believed it was "a bit unfair" to hold celebrities responsible for investment losses on products they endorsed when it was unlikely they would ever know exactly how sound the company they were endorsing was.

Mr Power said the proposals were part of the Government's review of securities law.

"The new legislation will be better for mum and dad investors as well as for New Zealand companies looking to raise capital," he said.

"It will provide clearer, more consistent information for investors and clarify obligations that issuers have to meet."

Mr Power said the modernisation of securities legislation would give New Zealand a robust framework that financial markets needed.

A working draft of the new legislation would be released in August for public consultation and a bill would be introduced before the November election.

- NZPA, NZHERALD STAFF