Anti-hawking explained
The anti-hawking law prohibits the unsolicited marketing and sales of financial products. The prohibition is found in s 992A of the Corporations Act 2001 (Cth) (the “Corporations Act”).
Changes to the anti-hawking law were made by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth) (the “FSR 2020 Act”). The changes took effect on 5 October 2021.
The anti-hawking prohibition says that a person must not offer a financial product for issue or sale to a retail client consumer, or request or invite the consumer to ask or apply for a financial product or to purchase a financial product, if the offer, request or invitation is made in the course of, or because of, an “unsolicited contact” with the consumer.
The key differences between this provision and the anti-hawking provision before the FSR 2020 Act are:
under the previous law, the prohibition only applied to telephone calls and meetings. It did not include other forms of real time contact, and it did not include requests or invitations to the consumer to ask or apply for a financial product, or to purchase a financial product (only the selling or issuing of products); and
under the previous law there was an exception that allowed for offers or sales of financial products in the course of, or because of, an unsolicited telephone call, provided that certain conditions were met. These conditions included, among other things, that the consumer was only contacted at prescribed times and that the consumer was not listed on the No Contact/No Call register. This exception no longer applies under the new law.
ASIC has issued guidance on anti-hawking in its regulatory guide RG 38.
What is unsolicited contact?
Unsolicited contact is defined in s 992A(4) of the Corporations Act. Contact with the consumer in connection with a financial product is unsolicited contact with the consumer in connection with the product if:
the contact is wholly or partly in a telephone call, a face to face meeting, or any other real time interaction in the nature of a discussion or conversation; and
either the consumer did not consent to the contact, or if the consumer did consent to the contact, certain consent requirements are not met.
Consent requirements
S 992A(5) of the Corporations Act has requirements that apply to getting the consent of the consumer for contact being made, in order for the consent to be effective. If these requirements are not met, the contact with the consumer is treated as unsolicited. The consent requirements are as follows:
in the case of an offer of a financial product for issue or sale to the consumer, either (i) the consent was a consent to the person contacting the consumer for the purpose of making the offer, or (ii) offering to the consumer that financial product for issue or sale was reasonably within the scope of the consumer's consent;
in the case of a request or invitation to the consumer to ask or apply for a financial product or to purchase a financial product, either (i) the consent was a consent to the person requesting or inviting the consumer to ask or apply for, or to purchase, that financial product, or (ii) requesting or inviting the consumer to ask or apply for, or to purchase, that financial product was reasonably within the scope of the consumer's consent;
the consumer gave the consent before the start of the contact;
giving the consent was a positive and voluntary act of the consumer;
the consent was clear, and a reasonable person would have understood that the consumer consented to the contact;
if the consent indicated the form of contact that the consumer wants, the contact is in that form;
the consent was given within 6 weeks before the contact occurs or within such longer period (not exceeding 12 weeks) as the consumer agrees to, if the issue or sale of the financial product reasonably requires a period exceeding 6 weeks to allow for a medical examination; and
the consent was not withdrawn before the contact occurs.
ASIC RG 38 has commentary on these provisions which gives guidance on how they can be applied.
Exceptions to the general prohibition
The prohibition on hawking of financial products is subject to some exceptions. These are set out in s 992A(2) of the Corporations Act.
One exception is where an offer, request or invitation is made in the course of the giving of advice to the consumer by a person who is required to act in the best interests of the consumer in relation to the advice. In effect this means that the hawking prohibition does not apply when personal advice is being given to the consumer.
Exceptions can also be made by regulation. There are a number of exceptions listed in reg. 7.8.12A of the Corporations Regulations 2001 (Cth). They include listed securities, basic deposit products (subject to some conditions) and the issue or sale of a product that is substantially similar to one already held by the customer.
The other exception relates to add-on insurance products. The anti-hawking prohibition does not apply while the deferred sales model for add-on insurance products applies. A new deferred sales model for add-on insurance products was also included in the FSR 2020 Act and commenced on 5 October 2021. The deferred sales model applies across all sales channels, including in-person and online. It prohibits the sale of add-on insurance products for at least 4 days after a customer has entered into a commitment to acquire the principal product or service.
S 992A also clarifies that advertising an offer, or publishing a statement about an offer, is not unsolicited contact, provided that the advertisement or statement meets the requirements for advertising financial products.
Complying with anti-hawking
Under the anti-hawking prohibition, gaining effective consent is the most prudent course of action before any cross-selling activity. For consent to be effective, however, it can’t be imposed on the customer.
The other important adaptation relates to the methods of delivery of direct marketing communications. Real-time contact in any form without consent will not be permitted under the anti-hawking prohibition, and so product sellers should consider alternative methods of personalised marketing which do not involve real-time contact, such as mail and email communication (in the latter case, subject to the Spam Act 2003 (Cth) requirements).
If you need assistance complying with the anti-hawking law, please contact us.