Taiwan’s Financial Supervisory Commission (FSC) has imposed fines on Yuanta Funds and Uni-President Asset Management for using misleading advertisements in promoting their high-dividend exchange-traded funds (ETFs). The advertisements, which contributed to record-breaking fundraising earlier this year, were found to be unsuitable and potentially deceptive to investors.
Yuanta Funds Penalized for Misleading Promotion
Yuanta Funds, Taiwan’s largest local ETF issuer, received a fine of NT$900,000 (approximately $27,864) from the FSC’s Securities and Futures Bureau (SFB). The penalty was imposed for the inappropriate advertising of its Taiwan Value High Dividend ETF.
The SFB’s investigation revealed that the promotional content used by Yuanta Funds had the potential to mislead investors. The advertisements suggested that investments in the ETF were “capital guaranteed” and would provide “guaranteed returns.” Furthermore, they heavily promoted the concept of monthly dividend payouts, which could give investors an unrealistic expectation of consistent income.
Record-Breaking Fundraising
In March, the Yuanta Taiwan Value High Dividend ETF managed to raise an astounding NT$170 billion in just five days. This achievement shattered the previous record for onshore ETF fundraising by more than five times.
The ETF was marketed with slogans like “passive income is not a dream, increase your salary every month,” and claimed to meet “monthly cash flow needs.” These statements were flagged by the SFB as potentially misleading, giving investors false confidence in the stability and profitability of their investments.
Issues with Advertising Compliance
In addition to the misleading content, the SFB noted that the warning text required on the ETF’s advertisements was inadequately sized, failing to meet regulatory standards.
Yuanta Funds also partnered with financial influencers to create promotional videos emphasizing the ETF’s ability to provide fixed dividend payments and enhance retirement income. The SFB identified phrases such as “interest falls like rain” and “get NT$50,000 a month for retirement” as particularly inappropriate, further contributing to the misleading nature of the campaign.
Uni-President AM Also Penalized
Uni-President Asset Management was fined NT$600,000 for similar offenses in the promotion of its UPAMC Taiwan High Dividend Momentum ETF. This ETF, which raised NT$53.1 billion during its initial fundraising in early March, was also promoted with content that misled investors into believing that their investments were “capital guaranteed” or would yield “guaranteed returns.”
Inappropriate Marketing Tactics
Uni-President AM used a range of promotional channels, including official websites, social media platforms, collaboration videos with financial key opinion leaders (KOLs), and seminars with financial experts. The SFB highlighted phrases like “creating an uninterrupted cash flow” and “providing automatic salary increase” as misleading. The advertisements also used backtested results of the ETF’s underlying index to project capital gains or dividend payouts, suggesting high returns that may not be achievable.
Regulatory Concerns Over Market Overheating
The two high-dividend ETFs from Yuanta and Uni-President have been among the most successful ETF launches in Taiwan’s onshore market. However, their success has raised concerns among regulators about a “herding effect” in the overheated ETF market.
Expert Opinion on Marketing Practices
Chu Yueh-Chung, an assistant professor at the Southern Taiwan University of Science and Technology’s finance department, commented earlier this year that fund houses have engaged in “completely unscrupulous” marketing activities. The aggressive advertising campaigns have led some retail investors to take out loans or withdraw money from fixed deposits to invest in high-dividend ETFs, exposing them to unnecessary financial risks.
Conclusion
In response to these issues, the Securities Investment Trust and Consulting Association published an updated code of conduct in May, outlining stricter guidelines for asset managers’ advertising and business activities. The penalties imposed on Yuanta Funds and Uni-President AM serve as a reminder of the importance of transparency and responsibility in financial marketing.
