Law Presses Firms for Honesty in Advertising

Promises of apartments in Paris, 1,000 percent annual returns and vacations in paradise could soon disappear from Russian airwaves and television screens under Russia's first law on truth in advertising, officials said Tuesday."If properly implemented, the law would change the face of Russian advertising completely, making it much more objective," said Bella Zlatkis, head of public securities and financial markets at the Finance Ministry. "Today a majority of finance companies are running irresponsible advertising."The law is aimed at the hundreds of investment companies that have emerged on the Russian financial market over the past few months, luring Russians with promises of huge and quick returns. Many of them have turned out to be frauds, duping tens of thousands of inexperienced investors out of their savings. Under a decree signed by President Boris Yeltsin last week and obtained by The Moscow Times on Tuesday, companies cannot "announce guarantees, promises or forecasts on their future effectiveness" or make comparisons with other companies that cannot be backed by statistics or audit results. They must provide company information in all advertisements, including previous returns on deposits and the date of share issue registration. Companies that do not comply with the new regulations could lose their licenses.Introducing the decree during his nationally televised press conference last Friday, President Yeltsin criticized "companies promising houses in Paris," a clear reference to an advertisement for the MMM investment company, in which protagonist Lyonya Golubkov plans to obtain an apartment in Paris by investing in MMM shares.Bakhyt Kilibayev, MMM spokesman and director of MMM-Studiya, which produces all of the company's commercials, denied Tuesday that the MMM advertisements were irresponsible, but added that the company would make changes if officials ordered it to do so. "We will comply with the law," Kilibayev said. Government officials have long said that powerful advertising campaigns were the key to success for fraudulent investment firms, but Russia has lacked legislation to control advertising.Nikolai Rebelsky, head of security markets department at the Russian Anti-Trust Policy Committee, said Tuesday that all investment companies use irresponsible advertising to attract investors. He said that many of these companies did not even have a license to run investment businesses.Under the new decree, irresponsible advertisers still have at least a month before the decree is enforced: the Anti-Trust Committee has one month to draw up a system of implementation, for which the committee, Central Bank and Finance Ministry will be responsible.The decree applies to television, radio and newspaper advertisements as well as billboards, metro and other street advertising. But it stops short of holding media outlets responsible for the ads they run.Alexei Sitnin, spokesman for the Central Bank, was skeptical as to whether the decree could be enforced, saying that the state bank has already sent numerous reports on unlicensed investment companies to the State Prosecutor's Office with no result."There is not a single completed case based on our reports to the prosecutor's office," he said.