ASIC consults on draft guidance for incoming anti hawking reforms
02 August 2021
What you need to know
- Amendments to the existing anti-hawking regime commence on 5 October 2021 and are intended to give effect to recommendations from the Financial Services Royal Commission
- ASIC is seeking feedback on its proposals for updating its regulatory guidance to reflect these upcoming anti-hawking reforms
- Submissions to ASIC are due on 18 August 2021 and ASIC is aiming to issue the updated guidance in September 2021
What you need to do
- Consider whether your sales practices require alteration in keeping with the proposed anti-hawking regime, and if so, ensure that they are appropriately modified prior to 5 October 2021
- If you intend to make a submission on the draft guidance, submit to ASIC on or before the due date of 18 August 2021
Upcoming Hawking Reforms
Schedule 5 of the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth) (Amending Act) commences on 5 October 2021 and, amongst other things, amends the existing anti-hawking regime in Parts 6D and 7 of the Corporations Act 2001 (Cth) (Corporations Act). These amendments are intended to give effect to recommendations 3.4 and 4.1 of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry (the Financial Services Royal Commission).
Importantly, the Amending Act replaces the existing three separate prohibitions on hawking of financial products with a new general prohibition in section 992A(1) that provides that a person must not offer a financial product for issue or sale to a customer, or request, or invite the customer to ask or apply for a financial product or to purchase a financial product, if:
(a) the customer is a retail client; and
(b) the offer, request, or invitation is made in the course of, or because of, an unsolicited contact with the customer.
Revision of ASIC Regulatory Guidance
On 23 July 2021, the Australian Securities and Investments Commission (ASIC) issued Consultation Paper 346 The hawking prohibition: Update to RG 38 (CP 346). ASIC is seeking feedback on CP 346 and its proposals for updating Regulatory Guide 38 The hawking prohibitions (RG 38) to reflect the upcoming hawking reforms. Submissions are due on 18 August 2021 and ASIC is aiming to release the updated RG 38 in September 2021.
In particular, ASIC is seeking feedback on:
- revisions and clarifications to RG 38 on the types of communications and the nature and scope of consent to which the hawking prohibition applies; and
- additional guidance on the right of a consumer to return a product and be refunded when there has been a breach of the prohibition.
Forms of contact subject to the prohibition
ASIC is proposing to update its guidance to include further information on the forms of communication that are subject to the hawking prohibition, including real-time interactions, advertising and information-giving practices.
ASIC has sought feedback from stakeholders on:
- what forms of communication they currently use, or foresee using, with consumers, and whether they anticipate any practical issues raised by the prohibition in respect of those forms;
- whether there is any additional or alternative guidance they think would be useful in helping them design and monitor communication methods with consumers; and
- whether they currently use unsolicited real-time contact to advertise or provide consumers with information about their products, and if so, what types of information do they provide, and how do they communicate it.
Nature of the consent required for contact
ASIC is proposing to revise its guidance on the nature of the consent that is required from a consumer who wishes to be contacted about a financial product.
ASIC has sought feedback from stakeholders on:
- whether they anticipate any practical issues in seeking consumer consent;
- whether there is additional or alternative guidance they think would be useful to help them design internal policies and processes to ensure compliance with the new prohibition; and
- whether they anticipate any practical issues associated with their implementation of ASIC's guidance on the creation and maintenance of records, including practices that may help offerors meet their obligations.
Establishing the scope of the consumer's consent
ASIC is proposing to revise its guidance to clarify that it expects an offeror to offer, issue or sell to a consumer (or invite or request them to purchase or apply for) only financial products that are reasonably within scope of what the consumer has consented to.
ASIC has sought feedback from stakeholders on:
- whether they agree with our proposed guidance on offering products that are within reasonable scope of a consumer’s consent;
- what products they commonly cross-sell or bundle together for sale or issue and whether the prohibition raise practical issues for these practices; and
- whether there is any additional or alternative guidance they think would be useful to help them design or update their processes and procedures for their staff to identify the products that are within the scope of a consumer’s consent.
The right to return a product and receive a refund
ASIC is proposing to include guidance on the consumer remedy giving a consumer the right to return a product and receive a refund when the hawking prohibition has been breached, as well as how this remedy will operate for different financial products.
ASIC has sought feedback from stakeholders on:
- whether the payment of refunds for financial products raises any practical issues;
- to the extent applicable, how financial product issuers currently comply with the existing rights of return, providing details of any challenges they face in meeting those obligations and why they are relevant to compliance with the new provisions; and
- whether there is any additional or alternative guidance that they think would help offerors to meet their obligations to allow consumers to return products and to provide refunds.
Authors: Lisa Simmons (Partner) and Rehana Box (Partner).
