ASIC is consulting on an updated Regulatory Guide 38 which reflects the changes to the anti-hawking regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, which is due to commence on 5 October 2021.
Section 992A of the Corporations Act contains a general prohibition against the hawking of financial products (as defined in section 763A), for example, insurance products. Currently it provides that a person must not offer financial products for issue or sale in the course of, or because of, an unsolicited meeting or personal contact with another person. Unsolicited contact is restricted to contact with people whose names are not on a “No Contact/No Call” List and who have been contacted already during hours permitted by ASIC.
The new section 992A of the Corporations Act consolidates the three existing hawking prohibitions in sections 736 (relating to securities), 992A (general) and 992AA (relating to managed investment schemes) into a single prohibition covering all financial products.
Key features of the new section 992A include:
- application to all financial products, including insurance and superannuation;
- a definition of ‘unsolicited contact’ that extends the prohibition from in-person meetings and telephone calls, to any ‘real-time interaction in the nature of a conversation or discussion’ without consumer consent;
- that consumer consent must be positive, voluntary, clear and capable of being reasonably understood;
- Only a product which is ‘reasonably within the scope’ of the consumer’s consent may be offered;
- that consent only be valid for six weeks from the date it is given and may be withdrawn by the consumer at any time, and
- a statutory right of return for consumers who have been hawked a product.
The prohibition does not apply to:
- communications in the context of providing personal financial advice; and
- products during any applicable deferred sales period under the add-on insurance reforms
Basic banking products will also be exempt (see here).
The updated RG 38 will update and clarify:
(a) the forms of contact that are subject to the prohibition;
(b) the nature of the consent that is required from a consumer who wishes to be contacted about a financial product; and
(c) what is required to establish consumer consent.
Real-time contact and interaction
The new s992A(4)(a)(ii) provides that the hawking prohibition applies to any real-time contact or interaction that is in the nature of a discussion or conversation. Paragraph 5.58 of the Explanatory Memorandum states that
the new hawking prohibition is intended to apply regardless of the medium used to contact the consumer if the contact takes place in real time.
Advertising and information-giving practices
The updated RG 38 states that the prohibition does not prevent an offeror from advertising financial products or providing information so long as:
(a) the interaction with the customer does not take place in real time in a manner of a conversation or discussion; or
(b) no offer, invitation or request is made during or because of the advertisement or provision of information.
Nature of the consent required for contact
ASIC says its guidance will make clear the nature of the consent that is required from a consumer who wishes to be contacted about a financial product, including:
(a) that the consent must be positive, voluntary, and clear;
(b) that a reasonable person would have understood that a consumer consented to the contact;
(c) that the consumer can vary or withdraw the consent and the implications of doing so;
(d) the time period following consent within which the contact must be made; and
(e) the records that an offeror may need to keep.
Establishing the scope of the consumer’s consent
ASIC expects an offeror to offer, issue or sell to a consumer (or invite or request a consumer to purchase or apply for) only financial products that are reasonably within scope of what the consumer has consented to, including offers of crosssold or bundled products.
A consumer may be offered more than one financial product during a contact if the consumer consented to being contacted about multiple products before the contact, or the consumer’s consent is sufficiently broad so as to reasonably apply to more than one product.
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Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.