Anti-Hawking Prohibition Reforms for Financial Products

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In what is the last of a raft of compliance changes commencing in October 2021 to be finalised, ASIC has now released its guidance in relation to the revised anti-hawking regime. The anti-hawking reforms seek to provide retail clients with greater control over their decisions to purchase financial products.  This includes allowing retail clients to determine how they can be contacted by a financial services provider and the kinds of financial products they are offered.

What are the Requirements?

From 5 October 2021, AFS licensees are not permitted to offer, sell or issue a financial product to a retail client if the offer, sale or issuance is made in the course of, or because of, unsolicited contact with the retail client. This conduct is prohibited under the Corporations Act and is known as the general prohibition in relation to the hawking of financial products.

Unsolicited contact includes any contact with a retail client relating to a financial product that is made by telephone, face-to-face meeting or any other real-time interaction, where:

  • the retail client did not consent to the contact; or
  • the retail client did consent to the contact but the strict requirements imposed by the general prohibition in relation to consent were not satisfied.

Who does the Regime Apply to?

The general prohibition applies to retail clients only. Notably, it does not apply when an offer, request or invitation is made to a retail client in the course of providing the retail client with personal financial product advice.

The Corporations Regulations also exclude some financial products and situations from the general prohibition, including but not limited to:

  • 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.

The general prohibition is not limited to the provider of the financial product but extends to the actions of all employees, agents and representatives of an AFS licensee.

Remedies

A breach of the general prohibition is a strict liability criminal offence and offenders may be subject to monetary penalties (for corporations) and imprisonment and monetary penalties (for individuals).

Further, where a retail client is issued or sold a financial product in breach of the general prohibition, the retail client has a right of return and refund. The timeframes and amount to be refunded to a retail client when exercising their right of return and refund depend on the financial product acquired.

How can Sophie Grace Assist?

We have developed an Anti-Hawking Policy template to ensure an AFS licensee’s compliance with the general prohibition. The Anti-Hawking Policy template can be purchased from the Sophie Grace shop. We can also assist you with your AFS licence ongoing compliance obligations. Further information can be found on our website or by contacting us.

Background

The Corporations Act previously contained three separate prohibitions for the hawking of financial products generally, securities products and interests in managed investment schemes. The findings of the Royal Commission indicated the existing prohibitions did not adequately protect retail clients from harm, particularly surrounding inundating sales calls made to retail clients of superannuation and insurance products.

On this basis, the Financial Sector Reform (Hayne Royal Commission Response) (Hawking of Financial Products) Regulations 2021 was introduced to amend the Corporations Act to prohibit the hawking of financial products to retail clients as well as clarify the definition of hawking. ASIC has released an updated Regulatory Guide 38 to provide further guidance on the anti-hawking regime. 

Further Reading

About The Author

Victoria Lombardo

Victoria Lombardo

Victoria provides support to our compliance and legal teams and assists our clients with the preparation and collation of documentation required for AFS and credit licence applications. She also supports senior staff by providing assistance to clients with the maintenance of their licences through the preparation of compliance policy documents and ongoing compliance support.