Do you remember when you used to go into a bank requesting a bank cheque to buy a car, and next thing you know the teller is trying to sell you car insurance? Since October 2021, this kind of unsolicited selling is largely prohibited under the hawking prohibition, unless an exemption applies.

So, what is the hawking prohibition and what does it mean for your business? Let’s explore.

What is the hawking prohibition?

The hawking prohibition is a critical regulatory measure in the financial services industry, designed to protect consumers from unsolicited offers of financial products. Outlined in section 992A(1) of the Corporations Act 2001 and further detailed in ASIC’s Regulatory Guide 38 (RG 38), its primary goal is to ensure consumers have greater control over their decisions to purchase financial products, minimising the risk of acquiring products that do not meet their needs.

Who does the hawking prohibition apply to?

The prohibition specifically targets offers of financial products made to retail clients in real-time.

This includes issuers or sellers of financial products, as well as their agents or representatives​​. It is important to note that the prohibition is not limited to direct offers from the provider of a financial product. Agents and representatives of the provider are also covered, meaning that any third party acting on behalf of the provider is subject to the same restrictions. Entities cannot circumvent the prohibition by engaging third parties to make offers on their behalf; if there is no such relationship, the third party would still be responsible for any contravention of the hawking prohibition​​.

Unsolicited conduct

At the core of the hawking prohibition is the restriction of offers, requests, or invitations made during or because of unsolicited contact. Unsolicited contact is defined as any real-time interaction (e.g., phone calls, face-to-face meetings, online chats) that the consumer did not consent to beforehand. This includes scenarios where the consumer is approached without having expressed a prior interest in receiving information about the financial product.

Requirements for consent

For an offer to be exempt from the hawking prohibition, consumer consent must meet specific criteria:

1. Positive and voluntary consent: The consent must be actively given by the consumer without any form of coercion or misleading conduct. This ensures that consumers are not pressured into giving consent and that their decision is made freely and willingly.
2. Clear and reasonably understood consent: The consent must be explicit and understood by the consumer. This means the scope of what the consumer is consenting to must be clear. If in doubt, the offeror can clarify and/or confirm the scope of the contact to which the consumer gives consent but not use the process to artificially broaden or elicit consent.
3. Tracking and recording consent: Offerors are required to keep detailed records of the consent provided by consumers. These records should include the date and method of contact, the specific products within the scope of the consent, and any variations or withdrawals of consent. This helps in demonstrating compliance with the hawking prohibition and managing any disputes that may arise​.

Other exemptions to the hawking prohibition

There are several other exemptions to the hawking prohibition. Some examples are below:

1. Personal financial advice: Offers made in the course of providing personal financial advice when the advisor is required to act in the consumer’s best interests.
2. Basic banking products: For example, term deposits.
3. Listed securities: Offers, requests or invitations made to consumers by telephone in relation to listed securities or interests in listed managed investment schemes.
4. Certain offers to existing clients: Contacting a client in relation to a product held by them or to a client regarding a product renewal that involves the offer of a substantially similar new financial product, as long as the product to be renewed was held within 30 days prior to the offer.
5. Off-market unsolicited offers: Unsolicited offers to purchase financial products off-market.
6. Specific statutory requirement: Offers, requests or invitations made as result of a specific statutory requirement.
7. Employee share schemes: A financial product that is made under an eligible employee share scheme.
8. Managed investment schemes and securities: Offers for the issue or sale of securities or interests in managed investment schemes if that offer is made to a client on whose behalf the offeror acquired or disposed of products in the last 12 months e.g. a stockbroker trading securities for a client.

Consequences of non-compliance

A breach of the hawking prohibition occurs at the moment the offer, request, or invitation is made, regardless of whether the consumer ultimately purchases the product. The objective is to prevent the initial unsolicited contact that could pressure consumers into making decisions. Non-compliance with the hawking prohibition can result in significant consequences, including:

• Return of the product: Consumers have the right to return any product obtained through a prohibited unsolicited offer and receive a refund.
• Regulatory action: Entities and individuals found in breach of the prohibition may face regulatory actions, including fines and other penalties imposed by ASIC.

The hawking prohibition is a critical regulatory measure ensuring that consumers are not subjected to unwanted financial product offers. It establishes clear guidelines for obtaining consumer consent and delineates specific circumstances under which offers can be legitimately made to retail clients.

This doesn’t extend to product offers that are not made in real time (e.g. emails), but they still need to comply with the Spam Act 2003, which is a topic for another day.

Need help ensuring your business complies with the hawking prohibition? Reach out to our team.