Prohibition on hawking financial products (and credit products)
AFS licensees who provide financial services to retail clients and credit licensees are prohibited from:
- offering a financial product or credit product for issue or sale, or
- requesting or inviting a client to ask for, apply for or purchase financial or credit products;
where the offer, request or invitation is made in the course of unsolicited contact. This general prohibition is not limited to the provider of the financial product or credit product but extends to the actions of all employees, agents and representatives of an AFS licensee.
Contact is considered unsolicited if:
- the contact is wholly or partly in one or more of the following
forms:
- telephone call;
- face-to-face meeting;
- any real-time interaction in the nature of a discussion or conversation; and
- the consumer did not consent to the contact or where the consumer did consent, the consent does not satisfy the requirements outlined in the Corporations Act.
To ensure that the consumer provided consent to the required standard, the consent must be:
- given prior to the contact;
- must not have been withdrawn;
- positive and voluntary – it must demonstrate a decision by the consumer ;
- clear –this is an objective test to determine that the consumer has consented to the contact;
- in the form specified (if any);
- within 6 weeks before the contact occurs.
ASIC's guidance on real-time interactions
In RG 38, ASIC states that:
"real-time interactions are ones where the offeror and consumer respond to each other continuously in real time, or where an expectation exists that both parties will provide an immediate response to each other ... This includes both verbal and written communication."
It is important to note that some messages may create an expectation that an immediate response can be provided whiles others may not. ASIC's guidance notes that "[a]n offeror is not prevented by the hawking prohibitions from using communications that are not real time to encourage consumers to request future contact ... However, the offeror would need to ensure that any later offer, request, or invitation complies with the hawking prohibition.
Examples
Here are two (2) examples to consider:
- An online click-bait advertisement requests consumers input their personal information in a digital form in order for a financial planner to give them a call back at more convenient time.
If the financial planner receives the submitted form and calls the consumer this telephone call is unlikely to be considered unsolicited contact because the consumer has consented to the contact.
- An online click-bait advertisement requests consumers input their personal information in a digital form in order for the consumer to access more information on a website about a financial planner's services and products available.
If the financial planner calls the consumer and offers them services or products, this call may be considered unsolicited because the consumer has not consented to the contact.
Situations and financial or credit products that are not considered hawking
Some financial products, credit products and situations are not considered hawking. Here's a few examples:
- an offer for the issue or sale of listed securities or an interest in a listed managed investment scheme that is made by telephone by an AFS licensee;
- an offer for the issue or sale of securities or an interest in a managed investment scheme that is made by an AFS licensee through whom the retail client has acquired or disposed of a securities product or an interest in a managed investment scheme in the preceding (12) months;
- a crowd-sourced funding offer;
- low value non-cash payment facilities;
- property rental schemes;
- managed discretionary account ("MDA") providers; and
- mortgage investment schemes with no more than twenty (20) investors.
A breach of the general prohibition is a strict liability criminal offence (section 992A of the Corporations Act). Offenders may be subject to monetary penalties (for corporations) and imprisonment and monetary penalties (for individuals). Where a retail client is issued or sold a financial product (or credit product) in breach of the general prohibition, the retail client has a right of return and refund (RG 38.129 – 38.147). The timeframes and amount to be refunded to a retail client when exercising their right of return and refund depend on the financial or credit product acquired.
Further Reading
- ASIC issues warning over dodgy cold calling operators and online baiting tactics (Media Release)
- ASIC publishes guidance on hawking reforms
- National Advice Solutions charged with anti-hawking offences following alleged superannuation sales cold calls
- ASIC Regulatory Guide 38 – The hawking prohibition
- Sophie Grace Blog "Anti-Hawking Prohibition Reforms for Financial Products"
- Sophie Grace Blog "ASIC Action – anti-hawking"
- Sophie Grace Blog "Marketing Guidelines for Financial Services and Credit Providers"
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
