ASIC has published updated regulatory guidance on the prohibition of hawking financial products which it says provides further clarity to industry on how they can comply with the regime and how the reforms affect commercial practices.
A statement from the commission says its updated regulatory guide (RG 38) reflects the reforms to the anti-hawking regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020, which commences on 5 October 2021.
ASIC notes that the guidance was enhanced “…by the constructive submissions received from industry and other stakeholders through the consultation.” It has added an additional 12 examples in response to the feedback received.
The statement says these reforms flow from recommendations of the Royal Commission 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 consent to being contacted and that consent must be positive, voluntary and clear.
ASIC Deputy Chair Karen Chester says that 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.”
Addressing long held concerns
She adds that 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 percent 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.”
Chester says 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 unawares or feeling pressured to make quick decisions.
“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.”
ASIC recently stated it will take a reasonable approach in the initial stages of the range of new obligations which commence in the first week of October, provided industry participants are using their best efforts to comply.
