ASIC’s updated regulatory guide (RG 38), which reflects the reforms to the anti-hawking regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, commences on 5 October 2021.
These reforms flow from recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and are designed to tackle consumer harms arising from consumers being approached with unwanted products through cold-calls or other unsolicited contact.
Under the 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 also consent to being contacted, and that consent must be positive, voluntary, and clear.
“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,” ASIC deputy chair Karen Chester said.
“The new hawking prohibition addresses long-held concerns about poor consumer outcomes from unsolicited sales of financial products. ASIC’s 2018 review of unsolicited life insurance sales calls revealed poor sales conduct and poor consumer outcomes, with 40 per cent of consumers feeling under pressure to buy a product.
“This led to recent criminal proceedings for the hawking of life insurance, and to date, ASIC has helped secure over $250 million in consumer remediation for consumer credit insurance and life insurance.”
The reforms introduced by the government mean that consumers will be able to control how and when they are offered products, rather than being caught unaware or feeling pressured to make quick decisions, according to Ms Chester.
Under the new laws, ASIC will be better able to tackle poor conduct by firms where consumers are pressured into products that are not right for them.
The guidance provides further clarity to the industry on how they can comply with the regime and how the reforms affect commercial practices.
ASIC’s guidance was enhanced by the constructive submissions received from industry and other stakeholders through the consultation and added an additional 12 examples in response to the feedback received.
ASIC also reminded it will take a reasonable approach in the initial stages of the range of new obligations that commence in the first week of October, provided industry participants are using their best efforts to comply.