The guidance emphasises the need for firms to maintain records of consumers giving consent to be sold financial products as a way to demonstrate compliance.
ASIC (Australian Securities and Investments Commission) has published updated regulatory guidance on the prohibition of hawking in financial services.
The finalised guidance comes ahead of hawking reforms that are due to take effect on 5 October to address recommendations from the Royal Commission, which identified consumer harms that arise from unwanted products purchased through cold-calls or other unsolicited contact.
Under the new hawking prohibition, a person must not offer a financial product to a retail client in the course of or because of unsolicited, real-time contact. A consumer must consent to being contacted, and that consent must be positive, voluntary and clear; only valid for six weeks; and may be withdrawn at any time.
The reforms also expand the definition of ‘unsolicited contact’ from in-person meetings and telephone calls to ‘any other real-time interaction in the nature of a discussion or conversation’ where consumer consent is not obtained.
ASIC issued a consultation on proposed updates to its guidance in July, seeking to provide further clarity to the industry on how firms can comply with the regime and how the reforms affect commercial practices. A dozen additional examples have been added to the guidance in response to consultative feedback. The response to submissions is published here.
In the guidance, ASIC says it expects records on customer consent to be kept, including information regarding when, in what form, and to what extent an offeror has received consent from a consumer to contact them about the issue or sale of products.
“Given that consumers can withdraw or vary their consent at any time, the maintenance of records will be necessary for offerors to demonstrate compliance with the hawking prohibition,” the guidance says.
ASIC has recently stated that it will take a ‘reasonable approach’ in the initial stages of the range of new obligations which commence in the first week of October, including the hawking reforms, provided industry participants are using their best efforts to comply.
The final guidance on the hawking reforms is available here.
“These changes put in place fairness protections, so consumers are not sold products they don’t want or don’t need. The restrictions mean consumer needs will be central to how firms offer products,” said ASIC deputy chair Karen Chester.
Consumers will gain more control over how and when they are offered products, and ASIC will be better able to tackle poor conduct where consumers are pressured into products that are not right for them, she added.
In 2018, ASIC’s review of unsolicited life insurance revealed poor sales conduct and poor consumer outcomes, with 40 percent of consumers revealing they felt pressured to buy a product.
Hawking of insurance products has since resulted in criminal proceedings against some firms and over AUD 250 million in consumer remediation being secured.