New anti Hawking Laws

If you need help complying with your anti-hawking regulations On this basis, the Financial Sector Reform (Hayne Royal Commission Response) (Hawking of Financial Products) Regulations 2021 was introduced to amend the Companies Act to prohibit the peddling of financial products to retail clients and clarify the definition of hawking. ASIC has issued an update to Regulatory Guidance 38 to provide additional guidance on the anti-peddling regime. On October 5, 2021, the revised legal ban on “hawking” financial products will come into effect. The reforms follow the 2019 report of the Royal Commission on Misconduct in the Banking, Pension and Financial Services Sectors, which found that changes to anti-hawking regulations were needed to protect consumers from selling financial products they didn`t need or want. If the consumer consents, but the offer of the financial product does not reasonably fall within the scope of that consent, the provider will violate Hawking`s prohibitions. Draft ASIC RG 38 provides additional guidance on the scope of consent, even if the offer or invitation is for bundled or cross-sold products. In addition, a consumer may discuss additional products as part of a contact, provided that this is done only on his own initiative and that his consent is positive, voluntary, clear and reasonably understandable.15 This may be the case, for example, if a consumer calls his bank to ask for credit card options and then notices that he wants the credit card for a holiday and also wants to take out insurance. journey. If the consumer raises travel insurance on their own initiative, in a positive, clear and voluntary manner, the supplier will not violate Hawking`s prohibition by quoting travel insurance.16 In the past, general insurance products were exempt from the Hawking regulation. They were able to cross-sell as long as they could meet certain requirements and provide important information to consumers. This exemption has ceased to exist. Essentially, the new Hawking Regulation prohibits product issuers and their representatives from making offers to sell retail financial products if the offer is made during or “because of” unsolicited contacts.

The new law: “Under the new laws, ASIC will be better able to combat bad corporate behavior that pushes consumers towards products that are not suitable for them.” ASIC has issued updated regulatory guidelines prohibiting trading in financial products. Consent is not voluntary if the consumer has been pressured or induced to do so. ASIC also confirmed its view that consent obtained from a consumer is not voluntary. Because a violation of Hawking`s prohibition is no-fault liability, a supplier may violate the prohibition even if it does not intend to obtain consent.8 The words “due to” cover offers that have an “ancillary connection” to unsolicited contacts. If a product issuer makes unsolicited contact with a consumer, but the actual offer is made in subsequent contact (which may have been requested, but that offer is outside the scope of consent), the offer has an ancillary link to the first unsolicited contact and would violate Hawking`s prohibitions. This may be the case, for example, if a consumer calls his bank to obtain information about term deposits and at the end of the call, without asking the consumer, the bank`s sales representative asks him if he can call the consumer the next day about the bank`s annuity products.9 The commercial agent issue caused the consumer`s consent for the subsequent call and, therefore, ASIC considers that consent cannot be invoked. be trustworthy. If the commercial agent makes the call and asks the consumer to apply for an annuity insurance product, this constitutes an unsolicited invitation to apply in violation of the Hawking prohibition. ASIC has published its final guidance for the new Hawking regime, which will come into effect on 5 October 2021[1].

This is ASIC`s last key regulatory directive ahead of the launch of the insurance and financial services sector reform packages next month. For example, if a consumer starts a discussion about an insured risk, but misunderstands the type of insurance coverage that applies to that risk, questions may be asked to clarify and identify the appropriate insurance and make offers for it without violating the Hawking regime. ASIC has previously highlighted the damage and poor outcomes for customers that can occur when customers are offered products in situations where they are not engaged, ill-advised, or have not reviewed the purchase in question in sufficient detail. ASIC commented that “Hawking`s new ban addresses long-standing concerns about poor consumer outcomes related to unsolicited sales of financial products” and will allow ASIC to “combat bad corporate behavior” that continues to put pressure on customers. The Corporations Act previously contained three separate prohibitions on dealing in financial products in general, securities products and investments in managed mutual funds. The Royal Commission`s findings suggest that the existing prohibitions did not adequately protect retail investors from harm, particularly in the context of the flooded selling pitches with retail annuity and insurance customers. New laws will amend company law to create a uniform general ban on the sale of all financial products. Under the new laws, a person will violate Hawking`s prohibitions if they offer to issue a financial product to a retail investor or ask the consumer to apply for it during or because of unsolicited contact with the consumer. Hawking`s prohibition applies to any “real-time interaction in the manner of a conversation or discussion.”1 In RG 38, ASIC provided guidance on the meaning of the term “real-time interactions” and confirmed that it captures communications when an immediate response is expected. These include traditional communication methods such as phone calls and face-to-face meetings, as well as newer technologies such as instant messaging and media that use artificial intelligence such as chatbots.2 ASIC has published draft guidance on how the new anti-hawking provisions will be applied in practice and is currently seeking comments from parties industry and public stakeholders.