Regulatory Alerts2023-03-05
Circular Regarding Rules for Advertising Products and Services Provided by Financial Institutions
The Saudi Central Bank (SAMA) issued this circular to establish binding advertising standards for all licensed financial institutions, mandating clear, accurate, and transparent promotional materials in Arabic or targeted languages. The rules require comprehensive disclosure of fees, APRs, risks, and target segments while prohibiting misleading claims, unauthorized use of the SAMA logo, and non-compliant third-party promotions. Financial institutions must implement a dedicated advertising policy, obtain customer consent for data usage and marketing communications, and ensure compliance through internal oversight, with a 60-day grace period for policy development.
Circular
To: Peace, mercy, and blessings of God be upon you.
Subject: Rules for Advertising Products and Services Provided by Financial Institutions.
Based on the Saudi Central Bank Law issued by Royal Decree No. 36/M dated 11/4/1442 AH, and in light of the SCS's ongoing efforts to protect financial institution clients, enhance disclosure and transparency in the financial sector, and determine the minimum standards and procedures that financial institutions must comply with when advertising financial products and services.
Attached are the Rules for Advertising Products and Services Provided by Financial Institutions, which all financial institutions must comply with, completing necessary procedures according to prevailing policies and procedures.
For information and action as of its date. Yours sincerely,
The President Yazed bin Ahmed Al-Sheikh Deputy Governor for Supervision
نظام التوزيع: Financial institutions subject to the supervision and oversight of the Saudi Central Bank.
Rules for Advertising Products and Services Provided by Financial Institutions
(First Edition – Sha'ban 1444 / March 2023)
Important Note: To keep pace with updates and amendments regarding circulars issued by the SCS, the SCS emphasizes the necessity of always relying on copies published on its website: www.sama.gov.sa
Contents
| Page No. | Subject |
|---|---|
| 3 | Introduction |
| 3 | Scope of Application |
| 3 | Definitions |
| 4 | Objective |
| 4 | Related Laws, Regulations, and Circulars |
| 5 | Rules and Procedures |
| 8 | Final Provisions |
Introduction
The SCS is the authority that monitors and supervises licensed financial institutions, with regulatory powers including framing and regulating matters related to the advertising of products and services provided by these institutions, based on the SCS Law issued by Royal Decree No. 36/M dated 11/4/1442 AH, and Article (Four) thereof, which stipulates: "The SCS performs its duties in accordance with the provisions of the Law, and regulations and policies issued by the Board, and according to the best international standards and practices. It has all necessary powers to achieve its objectives, and may exercise the following tasks and powers in this regard: 3- Issuing regulations and circulars related to financial institutions and their operations... 9- Formulating instructions and procedures sufficient to protect the clients of financial institutions." To achieve methodologies regarding the advertising of products and services provided by financial institutions to customers and consumers, the SCS has issued these Rules.
Scope of Application:
These Rules apply to all financial institutions when advertising any product or service they provide.
Definitions
| Term | Definition |
|---|---|
| SCS | Saudi Central Bank. |
| Financial Institutions | Entities subject to the supervision and oversight of the SCS under prevailing laws. |
| Customer | A natural or legal person who receives any of the products and services. |
| Consumer | A natural or legal person to whom the products and services are directed. |
| Products and Services | Any product or service provided by a financial institution. |
| Advertising/Advertisement | A commercial message promoted by any means, directly or indirectly. |
| Medium/Channel | The tool used for advertising, visual, auditory, or readable. |
Objective
These Rules aim to: a. Establish the regulatory framework and minimum standards and procedures that financial institutions must comply with when advertising their products and services. b. Enhance the confidence level of stakeholders dealing with financial institutions. c. Protect financial institution clients and enhance the principle of disclosure and transparency.
Compliance with Related Laws, Regulations, and Circulars
Financial institutions must comply, when advertising any service or product, with the provisions of these Rules and those that do not conflict with related laws, regulations, rules, and circulars - including any subsequent amendments thereto, including but not limited to: a. Laws, regulations, circulars, and rules issued by authorities responsible for regulating media and advertising content, including: the Ministry of Media and the Visual and Audio Media Authority. b. Banking Control Law. c. Cooperative Insurance Companies Control Law and its Executive Regulations. d. Financing Companies Control Law and its Executive Regulations. e. Real Estate Financing Law and its Executive Regulations. f. Finance Lease Law and its Executive Regulations. g. Payments and Services Law and its regulations. h. Rules for implementing the provisions of the Banking Control Law. i. Rules for regulating micro-consumer financing companies. j. Rules governing the supervision of banking operations. k. Updated consumer financing rules. l. Rules for issuing and operating credit cards and monthly installment cards. m. Rules governing banking agency operations in the Kingdom of Saudi Arabia. n. Updated rules for conducting crowdfunding/lending activities. o. Instructions on outsourcing tasks to third parties. p. Principles of conduct and business ethics in financial institutions. q. Any future circulars issued by the SCS that are relevant.
Rules and Procedures
Article 1: Financial institutions must exercise due care when advertising products and services regarding the content and method of advertising, avoiding vague, misleading, or inaccurate approaches. They must not exaggerate the features of those products or services, and all statements and figures used must be easy to understand in clear and legible font, including top or bottom margins.
Article 2: Arabic must be the primary language used in advertising products and services provided by financial institutions, except for advertisements directed at non-Arabic speakers, fully complying with these Rules.
Article 3: Financial institutions must fulfill advertising requirements for any product or service, which include at a minimum the following: 1-3 Name, logo, and contact details of the financial institution. 2-3 Name of the advertised product or service. 3-3 Key terms and conditions. 4-3 Target customer and/or consumer segment. 5-3 All fees and commissions related to using the service or product, inclusive of Value Added Tax (VAT); if advertising an insurance policy, it must clarify whether the price includes all fees or not. 6-3 Minimum transactions/requirements to avail the product or service, if any. 7-3 Explanation of risks mentioned in the advertisement, in the language of advertising. 8-3 If advertising a financing product or service, it must clearly state the Annual Percentage Rate (APR) and the financing term for the customer and/or consumer, if any; the advertisement must not include other rates for installments. If advertising a real estate financing product: it must clarify that the term cost is variable or fixed. 9-3 Subject to Paragraph 5 of Article 5, the advertisement must indicate that the financial institution is subject to the supervision and oversight of the SCS.
Article 4: Subject to Article 3 above, when advertising promotional offers, financial institutions must include the mechanism for availing such offers in a clear manner that facilitates customer and consumer understanding, specifying the start and end dates of the offer.
Article 5: Financial institutions are prohibited from doing the following: 1-5 Presenting an incorrect offer, statement, or claim, or one formulated in a way that directly or indirectly misleads customers and/or consumers. 2-5 Presenting an advertisement that infringes intellectual property rights or uses a counterfeit mark. 3-5 Using the name and/or logo of the SCS in their advertisements. 4-5 Presenting an advertisement that causes confusion with other products, services, or names. 5-5 Violating public order and morals or offending societal values and customs. 6-5 Implying in the advertisement's meaning incitement to commit crimes, any racial discrimination, or stirring up discord. 7-5 Advertising illegal products or services. 8-5 Using images representing the face, appearance, or part thereof of paper or metallic currency in circulation under Saudi law without obtaining a no-objection letter from competent authorities.
Article 6: If the advertised product or service is priced in foreign currencies, or if its value is affected by foreign exchange rates, the advertisement must contain the following statement: "The price of the product/service may be affected by changes in foreign exchange rates," and it must be in clear, legible font.
Article 7: When indicating that a product or service is provided free of charge, financial institutions must clarify this with an explicit statement specifying the target category for the product or service.
Article 8: When advertising their products and services, financial institutions must ensure they do not harm the reputation of the financial sector or the interests of other financial institutions, diminish them, or undermine the principle of competition.
Article 9: Financial institutions are prohibited from using customers' personal information and data in advertising materials unless they obtain written consent.
Article 10: Financial institutions are prohibited from sending advertisements for unsuitable insurance or credit products to individual customers and/or consumers under the age of eighteen (18) Hijri years.
Article 11: Financial institutions must obtain the customer's written or electronic consent regarding their desire to receive sent advertisements according to preferred channels, and must grant the customer a permanent right to opt out of receiving these advertisements easily and through clear, specified methods.
Article 12: Advertisements and their included offers, specifications, or features are binding on financial institutions, and advertised specifications must be included in the contract, agreement, policy, or equivalent document.
Article 13: Advertisements are issued through the official and reliable channels of financial institutions and/or via a licensed third party from the competent authority. Financial institutions must ensure the third party's compliance with these Rules and related circulars, and bear responsibility if the third party fails to comply.
Article 14: Financial institutions must develop a dedicated advertising policy compatible with these Rules and laws/circulars issued by the SCS and competent authorities, verify its implementation, and update it as needed, at least once every three years.
Article 15: The Compliance Department or its equivalent in the financial institution must review advertising materials and approve them in writing before publication, after confirming their compliance with these Rules and all related laws, regulations, and circulars.
Article 16: Without prejudice to the jurisdiction of competent authorities in case of violations under other laws, the financial institution is responsible if its advertisement content contains any violation.
Article 17: The SCS shall require financial institutions that do not comply with the instructions in these Rules or related circulars to withdraw the advertisement within one business day from notification by the SCS.
Final Provisions
1- These Rules are supplementary to other related rules and circulars, and repeal any conflicting provisions in any rules or circulars issued by the SCS before the date of issuance of these Rules. 2- The provisions of these Rules take effect from the date of their approval and are enforceable from that date. 3- Financial institutions are granted a grace period of sixty (60) days from the date of circular issuance to develop the policy stipulated in Article 14 of these Rules.