ASIC RG 38 — ASIC Regulatory Guide – RG 38 The hawking prohibition

Page 1 REGULATORY GUIDE 38 The hawking prohibition September 2021 About this guide This guide is for people who offer financial products for issue or sale. It sets out our guidance on the hawking provisions in s992A and 992AA of the Corporations Act. In particular, this guide explains how to comply with the hawking prohibition contained in s992A, a prohibition that aims to protect consumers from unsolicited offers of financial products. Page 2 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 2 About ASIC regulatory documents In administering legislation, ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in September 2021 and is based on legislation and regulations as at the date of issue. In March 2024 we deleted the previous RG 38.10, renumbering the preceding two paragraphs, and updated some legislative instruments. Previous versions:  Superseded Regulatory Guide 38 The hawking prohibitions, issued December 2019  Superseded guide The hawking prohibitions: An ASIC guide, issued July 2002 and reissued May 2005, and rebadged as a regulatory guide 5 July 2007 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 3 Contents A Overview .................................................................................................4 Purpose of this guide ...............................................................................4 The hawking prohibition ...........................................................................5 General consumer protection provisions .................................................6 B Scope of the hawking prohibition ........................................................7 What the prohibition applies to ................................................................7 Interaction with personal financial advice ................................................8 Interaction with the deferred sales model regime for add-on insurance products ..................................................................................9 Products and situations exempt from the hawking prohibition ................9 C Making offers because of or during unsolicited contact .................13 Forms of contact subject to the prohibition ............................................13 Real-time interaction in the nature of a conversation or discussion ......14 Offers, requests and invitations .............................................................14 Meaning of ‘because of’ in the hawking prohibition ...............................17 D Establishing consumer consent to be contacted.............................19 The giving of consent generally .............................................................19 Consent must be positive and voluntary ................................................20 Consent must be clear and reasonably understood ..............................23 Determining the scope of consent .........................................................29 Method of contact ..................................................................................35 Tracking consumer consent...................................................................36 E Consequences of breaching the hawking prohibition .....................39 Conduct that breaches the hawking prohibition.....................................39 General consequences of a breach .......................................................40 Return of a product ................................................................................40 Refunds to consumers ...........................................................................41 Appendix: Products exempt from the hawking provision as a result of ASIC legislative instrument or class order ...................................44 Key terms .....................................................................................................46 Related information .....................................................................................48 Page 4 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 4 A Overview Key points Under the hawking prohibition, a person must not, in the course of, or because of, an unsolicited contact with a retail client: • offer financial products for issue or sale; or • request or invite the client to ask or apply for financial products. The objective of the prohibition is for consumers to have greater control over their decisions to purchase financial products—the prohibition allows them to determine how they want to be contacted and the kinds of financial products they are offered. This guide explains: • the scope of the hawking prohibition; • how an offeror can comply with the prohibition; and • the consequences of a breach of the prohibition. Purpose of this guide RG 38.1 This guide is for people who offer financial products for issue or sale, and concerns situations involving unsolicited contact with consumers. RG 38.2 It sets out our guidance on the hawking provisions in s992A and 992AA of the Corporations Act 2001 (Corporations Act). In particular, this guide explains: (a) the scope of the hawking prohibition in s992A (see Section B); (b) what it means to make an offer because of or during an unsolicited contact (see Section C); (c) the nature of the consent a consumer must give in order for a contact not to be unsolicited (see Section D); and (d) the consequences of a breach of the prohibition, including a consumer’s right to return a product and receive a refund (see Section E). Note: In this guide, references to sections (s), divisions (Div) and parts (Pt) are to the Corporations Act, unless otherwise specified. RG 38.3 This document contains general guidance only. The application of the hawking prohibition will depend on the particular facts and circumstances of each case. Page 5 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 5 RG 38.4 In this guide, we have highlighted the core statutory provisions of the hawking regime (see, for example, at RG 38.5). Where we have done so, we have indicated the relevant subsections or paragraphs of s992A and 992AA to which we are referring. Note: These core statutory provisions are highlighted at RG 38.5, RG 38.20, RG 38.34, RG 38.39, RG 38.48, RG 38.57–RG 38.58, RG 38.63, RG 38.69, RG 38.85, RG 38.102, RG 38.108, RG 38.111, RG 38.115, RG 38.127–RG 38.128, RG 38.129, RG 38.132– RG 38.134, RG 38.135–RG 38.136. The hawking prohibition RG 38.5 Under s992A(1), a person (the ‘offeror’) must not offer financial products for issue or sale to a retail client if the offer is made in the course of, or because of, an unsolicited contact. RG 38.6 An offeror includes an issuer or seller of a financial product, as well as their agent or representative: see paragraph 5.31 of the Explanatory Memorandum to the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 (Explanatory Memorandum). The prohibition also extends to requesting or inviting a retail client to ask or apply for or purchase a financial product: see paragraph 5.28 of the Explanatory Memorandum. RG 38.7 ‘Unsolicited contact’ is contact by telephone, face-to-face, or any other real- time interaction in the nature of a discussion or conversation to which the consumer did not consent: see s992A(4). Note: In this guide, a person who offers, issues or sells a product, or who invites or requests a consumer to purchase or apply for a product is referred to as an ‘offeror’ and an existing, potential or prospective retail client or customer is referred to as a ‘consumer’, unless otherwise indicated. RG 38.8 The hawking prohibition is intended to provide consumers with a degree of control over their decisions to purchase financial products—it allows them to determine how they want to be contacted and the kinds of products they are offered: see paragraph 5.4 of the Explanatory Memorandum. RG 38.9 The prohibition aims to protect consumers from unsolicited offers of financial products, which often contribute to consumers purchasing products that do not meet their needs: see paragraph 5.16 of the Explanatory Memorandum. RG 38.10 A failure to comply with the hawking prohibition is an offence of strict liability (see s992A(9)), and will give rise to a right of return on the part of the consumer: see s992AA(1). Page 6 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 6 General consumer protection provisions RG 38.11 This guide should be considered in the context of the general consumer protection provisions of the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Act). RG 38.12 Regardless of whether an offeror is subject to the hawking prohibition for a particular interaction, the offeror needs to ensure that they otherwise comply with: (a) the product design and distribution obligations (see Pt 7.8A of the Corporations Act); and (b) the prohibitions on: (i) unconscionable conduct (see s12CA–12CC of the ASIC Act and s991A of the Corporations Act); (ii) misleading or deceptive conduct (see s12DA–12DB of the ASIC Act; s1041E–1041H of the Corporations Act); and (iii) harassment or coercion in connection with supply or payment for financial services (see s12DJ of the ASIC Act). RG 38.13 The obligations under the hawking regime are distinct from, and complementary to, the obligations above. Page 7 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 7 B Scope of the hawking prohibition Key points The hawking prohibition applies when: • a consumer is offered a financial product during or because of unsolicited contact; or • a consumer is requested or invited to ask for, apply for or purchase a financial product, in the course of, or because of unsolicited contact. Offerors of certain types of products are exempt from the requirements under the hawking prohibition: see RG 38.23–RG 38.33. The hawking prohibition does not apply when the offer, request or invitation is made in the course of giving personal financial advice: see RG 38.20. What the prohibition applies to RG 38.14 In general terms, the hawking prohibition in s992A(1) prohibits offers, requests or invitations to ask for, apply for or purchase a financial product in certain circumstances (‘offers, requests or invitations’). The prohibition applies where these offers, requests or invitations are made during or because of ‘unsolicited contact’ that is, partly or wholly, in the form of a real-time interaction in the nature of a conversation or discussion. Note: The term ‘unsolicited contact’ is defined in s992A(4) and (5). See also Sections C and D. In particular, for cases where consumers initiate contact, see RG 38.81–RG 38.84. RG 38.15 The prohibition in s992A(1) applies to the making of offers, requests or invitations, not to the sale or issue that may result. This means that a breach happens when the offer, request or invitation is made. It is not a defence that a consumer had or was given time after an offer, request or invitation to consider whether to proceed, nor that the consumer was ultimately not issued or sold the product. RG 38.16 Under s992A(1) ‘a person’ is prohibited from making these offers, requests or invitations. A person includes a body corporate. Paragraph 5.31 of the Explanatory Memorandum notes: … Applying the prohibition to such persons means that it is not limited to the provider of a financial service product—it can include, but is not limited to, agents and representatives of the provider of a financial product. Further, as entities are responsible for the actions of their agents and representatives, the hawking prohibition cannot be circumvented by engaging a third party to make offers on their behalf. Where there is no such relationship between a provider of a financial product and a third party who makes an offer, request or invitation, the third party will be solely responsible for any contravention of the hawking prohibition. Page 8 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 8 Offers made to retail clients RG 38.17 The hawking prohibition applies only to offers that are made to a retail client: see s992A(1)(a). Note: ‘Retail client’ has the meaning given in s761G of the Corporations Act and Div 2 of Pt 7.1 of the Corporations Regulations 2001 (Corporations Regulations). RG 38.18 For superannuation products, an offeror will not breach the hawking prohibition where they contact an employer to discuss the employer’s choice of default fund for employees who do not nominate a fund to receive payments. RG 38.19 Although employers are generally considered to be retail clients within the meaning of the Corporations Act in respect of default fund arrangements, employers are not typically offered, or requested or invited to apply for an interest in the fund as part of these conversations. An employer selecting a superannuation fund as a default fund for its employees does not constitute the issue or sale of a financial product to that employer. Note: Trustees are, however, subject to the prohibition under s68A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) regarding employer inducements, as well as the obligation to give an employer a Product Disclosure Statement (PDS) at or before the time they become an employer sponsor: see s1012I of the Corporations Act. Interaction with personal financial advice RG 38.20 Under s992A(2), the hawking prohibition does not apply to an offer, request, or invitation made in the course of giving personal advice to the consumer by a person who is required under Div 2 of Pt 7.7A to act in the consumer’s best interests. Note 1: For further guidance on the best interests duty and related obligations for financial advisers, see Regulatory Guide 175 Licensing: Financial product advisers— Conduct and disclosure (RG 175). Note 2: For more information on whether particular conduct amounts to the provision of financial product advice, see Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36). Page 9 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 9 Interaction with the deferred sales model regime for add-on insurance products RG 38.21 An offer, request or invitation relating to an ‘add-on insurance’ product is not subject to the hawking prohibition during any ‘add-on insurance deferral period’: see s992A(2)(b) and 992A(3). Except when provided for by regulation, add-on insurance products will be subject to the hawking prohibition prior to, and after, any add-on insurance deferral period. Note 1: Section 12DO of the ASIC Act defines an ‘add-on insurance product’ and s12DP defines ‘add-on insurance deferral period’. Note 2: It is a separate offence to offer an add-on insurance product during any applicable add-on insurance deferral period (see s12DR of the ASIC Act). For further information on the regulation of add-on insurance products, see Regulatory Guide 275 The deferred sales model for add-on insurance (RG 275). RG 38.22 Where an add-on insurance product is exempt from the deferred sales model regime (such as by s12DX or 12DY of the ASIC Act), the hawking regime will generally apply to it: see paragraph 3.120 of the Explanatory Memorandum. An offeror must then consider whether the product is reasonably within scope of the consumer’s consent under the hawking regime: see s992A(5)(a)(ii) and (b)(ii). Products and situations exempt from the hawking prohibition RG 38.23 Regulations may be made for the purpose of exempting products or classes of products from the hawking prohibition: see s992A(2)(c) and 992AA(3). Basic banking products RG 38.24 The Corporations Regulations exempt certain offers, requests or invitations that relate to basic banking products, including certain deposit products: see reg 7.8.21A(h) and (i). This exemption applies to offers relating to what are commonly treated as ‘basic’ deposit products for the purposes of the Corporations Act, including term deposits where funds can only be withdrawn after giving the issuer 31 days’ notice: see Example 1. RG 38.25 Under the exemption, any offer, request or invitation made in the course of contact that the consumer initiated is not subject to the hawking prohibition. Example 1: Basic banking product Tamanna has inherited a sum of money and attends her local bank branch to deposit it. In speaking to the bank teller, Hitesh, Tamanna mentions that she is looking to put it away for safe keeping. Hitesh notices that she is planning to deposit the money into a non-interest bearing account. Page 10 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 10 Hitesh suggests that if she wants, he could arrange for the money to be put into a three-year term deposit that she could terminate within 31 days’ notice. Hitesh informs Tamanna that, this way, she can get some interest on the money she is depositing, especially if she plans not to use it for some time. Hitesh’s conduct does not breach the prohibition, as the contact was initiated by Tamanna, and the product he introduces is a basic deposit product. Listed securities RG 38.26 Offers, requests or invitations made to consumers by telephone in relation to listed securities or interests in listed managed investment schemes are exempt from the hawking prohibition: see reg 7.8.21A(a) of the Corporations Regulations. Certain offers of products to existing clients RG 38.27 The hawking prohibition does not prevent contact with an existing client about a product already held by or on behalf of that client if the discussion does not involve an offer or invitation to apply for a new financial product: see paragraph 5.34 of the Explanatory Memorandum. RG 38.28 In some cases, existing clients may need to be contacted in relation to product renewals. These renewals may involve the offer of a new financial product that is substantially similar to the one the consumer already holds. In such cases, the existing client can be contacted so long as they held the product to be renewed within the 30 days prior to the offer: see reg 7.8.21A(j) of the Corporations Regulations. This may arise: (a) in the case of some types of financial products, when renewal of those products by a consumer involves the issuing of a new financial product (such as with term deposits or contracts for insurance); (b) where the consumer is looking to renew a legacy product, and an offer is made in respect of a non-legacy product equivalent; or (c) where the product held by the consumer lapsed within the last 30 days, and the ‘renewal’ requires the issuing (and therefore offering) of a new financial product. Example 2: Insurance contract renewal Sam’s motor vehicle insurance is about to expire, and they are contacted by Rosita, a representative of their insurer. On that call, Sam indicates to Rosita that they are considering swapping insurers. In response to this, Rosita offers to renew Sam’s policy for another year at a discounted rate. The renewal involves the issuing of a new financial product. However, as Sam is an existing customer of Best Insurance and the offer made was in relation to a contract still in force, Rosita will not have breached the hawking prohibition in making the offer on the telephone call: see reg.7.8.21A(j). Page 11 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 11 Example 3: Lapsed policy Lotte has pet insurance for her cat through Zel Insurance. The annual premium is paid every July by direct debit via her credit card. In April, Lotte decides to swap credit card providers, but forgets to change the direct debit information with Zel Insurance. In July, the payment of the insurance premium is declined by her old card issuer. As a result, her policy with Zel Insurance lapses. Three weeks later, Lotte receives a phone call from Fallon, a representative from Zel Insurance. Fallon indicates that he is calling because he noticed that the payment had been declined, and wanted to confirm with Lotte that she was aware that her insurance policy had lapsed. Lotte says she did not realise this had happened. Fallon says that he is able to reinstate Lotte’s policy if she would like. Lotte agrees. Fallon’s conduct in offering Lotte to reinstate her policy is not a breach of the hawking prohibition. Despite the fact that the reinstatement would involve the issue of a new financial product, the offer is permitted as it was in the nature of a renewal, involved a substantially similar policy to the one Lotte previously held, and was made within 30 days of the policy lapsing: see reg.7.8.21A(j). RG 38.29 Where the offer is for the issue or sale of securities or interests in managed investment schemes, the hawking prohibition does not apply, if that offer is made to a client on whose behalf the offeror acquired or disposed of products in the last 12 months: see reg 7.8.21A(b) and (c). Example 4: Stockbrokers Juanita, an authorised representative of a market participant, calls a selection of her current clients—who Juanita has traded securities for in the past 12 months—to provide them with an offer to buy securities she thought they may be interested in. Some clients confirm their interest and ask to hear more about the offer. Juanita emails the relevant offer documents during the call, so that she can talk the client through the offer. This conduct is not subject to the hawking prohibition as reg 7.8.21A(b) of the Corporations Regulations allows for offers of securities to a client of an offeror through whom the client has bought or sold securities within the last 12 months. Off-market unsolicited offers RG 38.30 The prohibition does not apply to unsolicited offers to purchase financial products off-market under Div 5A of Pt 7.9. A person who makes an offer to purchase financial products from another person should consider how Div 5A applies to that offer. Page 12 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 12 Offers, requests or invitations made as result of a specific statutory requirement RG 38.31 A superannuation trustee will not breach the hawking prohibition if it contacts a consumer to fulfil its statutory obligations as trustee, which may involve making an offer, request or invitation: see Example 5. Example 5: Unsolicited contact required by law Joe recently passed away. His superannuation fund Seraphic Super has a record of Joe’s binding death benefit nomination in which he nominated his husband, Jerry, as his beneficiary. Seraphic Super makes the relevant enquiries—which include contacting Jerry over the phone—and determines that Jerry is the person entitled to receive the benefit. Seraphic Super provides Jerry with a range of options for the payment of the benefit in accordance with Seraphic Super’s governing rules and the relevant requirements of the Superannuation Industry (Supervision) Regulations 1994. The hawking prohibition does not apply in this circumstance because there is a specific statutory obligation requiring contact (in contrast to a general prohibition). Seraphic Super has a statutory obligation to pay the benefit to the person entitled to receive it as soon as practicable after the member has died. Seraphic Super must contact the beneficiary to fulfil this statutory obligation. Other exemptions RG 38.32 In addition to the exemptions mentioned above, the Corporations Regulations also exempt offers, requests or invitations in relation to: (a) a crowd-sourced funding offer (see reg 7.8.21A(d)); (b) a financial product that is made under an eligible employee share scheme (see reg 7.8.21A(e)); (c) medical indemnity insurance provided to a medical professional as defined in the Medical Indemnity Prudential (Supervision and Product Standards) Act 2003 (see reg 7.8.21A(f)); and (d) an interest in a scheme that is in the nature of an insolvency litigation funding scheme, or a litigation funding arrangement (where declared not to be a managed investment scheme) (see reg 7.8.21A(g)). RG 38.33 In addition, certain types of financial products and certain entities are exempt from the requirements of s992A and s992AA under ASIC legislative instruments: see Table 1 in the appendix. The legislative instruments listed in that table give broader relief from a range of regulatory requirements (e.g. disclosure obligations) as well as the hawking prohibition, to products the function or features of which are such that it is not appropriate for the whole (or part) of the financial product regulatory regime to apply. We have given relief where there is low risk of consumer harm. Page 13 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 13 C Making offers because of or during unsolicited contact Key points An offer, invitation or request that takes place in the course of, or because of, an unsolicited contact is prohibited by s992A: see RG 38.39–RG 38.42 and RG 38.48–RG 38.56. For the purposes of the hawking regime, unsolicited contact is contact that takes place in real time to which the consumer did not consent: see RG 38.34–RG 38.38. The hawking prohibition does not generally apply to advertising or the mere provision of information: see RG 38.43–RG 38.47. The words ‘because of’ limit the breadth of offers that are prohibited to those where there is a ‘causal nexus’ between the unsolicited contact and the offer, request or invitation: see RG 38.48–RG 38.56. Forms of contact subject to the prohibition RG 38.34 Under s992A(4)(a), unsolicited contact in connection with a financial product is one which is, wholly or partly, in the form of: (a) a telephone call; (b) a face-to-face meeting; or (c) any other real-time interaction in the nature of a discussion or conversation. RG 38.35 An offeror is not prevented by the hawking prohibition from using communications that are not in real time to encourage consumers to request future contact: see Example 6. However, the offeror would need to ensure that any later offer, request, or invitation complies with the hawking prohibition. Example 6: Bulk mail-out Banksia Bank sends unsolicited letters and emails through a bulk mail-out to consumers. These letters and emails contain a reply slip for a consumer to request that Banksia call them at a future time and date convenient to the consumer to discuss certain types of products. Such letters and emails would not breach the hawking prohibition, as they do not constitute a real-time interaction. Further, if a consumer returns the reply slip and Banksia contacts them within six weeks of its return, the Page 14 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 14 telephone call is not unsolicited, even though the consumer did not consent to receiving the original letter. By contrast, if the consumer had not returned the reply slip, but Banksia nonetheless called the consumer and offered them products for sale, this call would be unsolicited, and the offers would constitute hawking. Real-time interaction in the nature of a conversation or discussion RG 38.36 The hawking prohibition is technology neutral. This means that, in addition to telephone calls and face-to-face meetings, the hawking prohibition also extends to other real-time interactions that are in the nature of a discussion or conversation, including instant messages, as well as through media that use artificial intelligence such as chat-bots: see s992A(4)(a)(iii). RG 38.37 The hawking prohibition cannot be circumvented by engaging a third party to make offers on a person’s behalf (as their representative or agent): see paragraph 5.31 of the Explanatory Memorandum. We consider that this includes where third parties are contracted to develop artificial intelligence sales tools, such as chat-bots. In such cases, the person commissioning the chat-bot’s use, or under whose licence it operates will be responsible for any offer, request or invitation made by the chat-bot. RG 38.38 Real-time interactions are ones where the offeror and consumer respond to each other continuously in real time, or where an expectation exists that both parties will provide an immediate response to each other: see paragraph 5.59 of the Explanatory Memorandum. This includes both verbal and written communication. As a result, whether forms of contact, such as text messages, constitute real-time interactions for the purposes of s992A(4) depends on the circumstances. Some messages may create an expectation of an immediate response, while others may not. Offers, requests and invitations RG 38.39 Section 992A(1) provides that a person must not offer a financial product for issue or sale to a consumer, or request or invite the consumer to ask or apply for a financial product or to purchase a financial product if the consumer is a retail client and the offer, request or invitation is made in the course of, or because of, an unsolicited contact with the consumer. RG 38.40 The hawking prohibition cannot be avoided by approaching a consumer and inviting or requesting them to ask or apply for a financial product: see paragraph 5.28 of the Explanatory Memorandum. Page 15 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 15 RG 38.41 Some of the factors involved in determining whether conduct constitutes an offer, request or invitation are likely to include the context of the interaction, behaviour of the consumer and offeror, as well as the actual words exchanged between the parties: see Example 7. RG 38.42 However, there are certain practices we consider would generally constitute an offer, request or invitation. For example: (a) providing a consumer with a quote (e.g. in the case of an insurance product) (see Example 5.5 in the Explanatory Memorandum); or (b) requesting or inviting a consumer to complete an application form (see paragraph 5.28 and Example 5.2 in the Explanatory Memorandum). Note: Consumers can still be provided with application forms, but they cannot be asked to fill them out. Example 7: Welcome calls and service calls Minh recently took out insurance on her boat with Xenial Insurance. The representative Minh organised the insurance with, Damian, makes a welcome call to Minh to ensure the product has been set up correctly and to identify any further assistance or products Minh may require. Minh did not request this call. During the course of the conversation, Minh mentions that she has just bought a caravan, and Damian identifies that Minh may need caravan insurance. Damian explains what Xenial’s caravan insurance covers and gives Minh some general information about the product’s features. This call is unlikely to have breached the hawking prohibition, as Damian’s conduct did not amount to the making of an offer, request or invitation in relation to a financial product. However, if Damian used the welcome call as an opportunity to make an invitation, offer or request, that conduct would likely breach the hawking prohibition. Advertising or giving information RG 38.43 An offeror can provide information to a consumer in real time—including discussing the existence, function and purpose or features of a product— without breaching the hawking prohibition provided that no offer, invitation or request is made, even when this contact is not requested by the consumer. RG 38.44 For the avoidance of doubt, where advertising or giving information involves practices that are not in the nature of a conversation, discussion, or real-time interaction, such as brochures, television or radio advertising, that conduct is not within the scope of the prohibition. Page 16 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 16 RG 38.45 Depending on the circumstances, offers, requests or invitations made using non-real time channels (such as email) following an unsolicited contact may still constitute a breach of the hawking prohibition. This is because offers, requests or invitations cannot be made ‘because of’ an unsolicited contact that is in real time: see also RG 38.48––RG 38.56. Example 8: Promotional material One-Stop for Everything is a supermarket chain that offers a variety of insurance products and regularly has tables set up inside its stores to hand out pamphlets about their cover. Harish is doing his shopping and walks past a stall. Freya, a promoter for One-Stop for Everything, offers Harish a pamphlet about the chain’s insurance products, and asks if he knew that One-Stop for Everything offers insurance. Harish indicates that he did not, and Freya explains that they provide a variety of car, home building and contents, and pet insurance policies. Harish thanks Freya for her explanation, takes the pamphlet, and continues shopping. In providing factual information about One-Stop for Everything’s products, Freya has not breached the hawking prohibition. Her conduct is unlikely to have amounted to a request or invitation to apply for the product. Example 9: Following up information provided in real time with non- real-time communication Rocio visits her local bank branch to get a bank cheque and explains that she needs the cheque to purchase a car. Lowanna is a staff member at the branch. Lowanna asks if Rocio has organised car insurance. Rocio indicates that she has not, but that she would like information on how to get it. Lowanna provides Rocio with a brochure and asks if she can send Rocio an email with further benefits and features of the different options. Rocio agrees and provides her email address. The following day, Rocio receives an email containing a telephone number to call and a hyperlink to apply online. Rocio clicks the ‘apply here’ link and follows the instructions to fill in her details and generate a quote. It is unlikely that a contravention of the hawking prohibition has occurred in this scenario. Lowanna provided information in real time and followed up with information about the product not in real time. Rocio took an active step to apply for the product after being provided information. If Lowanna made Rocio an offer for car insurance during the real-time interaction in the branch, this would be unsolicited, and would likely breach the hawking prohibition. If the email Lowanna sent Rocio after their meeting contained a quote for car insurance, this would likely breach the hawking prohibition because a quote constitutes an offer, and was because of unsolicited contact. Page 17 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 17 Example 10: Pop-up advertisements Donnah is checking her account balance on her investment loan on a personal banking app. A pop-up appears on her screen asking if she would like landlord insurance. The pop-up contains a link that allows Donnah to fill in her details and generate a quote for the insurance. There is also a button that allows Donnah to dismiss the pop-up. It is likely that this pop-up does not constitute a real-time interaction in the nature of a conversation or discussion; rather it is likely to be an advertisement. This is because the consumer and offeror are not responding to each other in real time, such that there is an expectation of immediate response: see paragraph 5.60 of the Explanatory Memorandum. As a result, the pop-up is unlikely to breach the hawking prohibition. RG 38.46 The hawking prohibition does not apply to the advertising of an offer, or the publication of a statement about an offer that otherwise complies with or is subject to an exemption in s734 or s1018A: see s992A(7). Note: See also Regulatory Guide 254 Offering securities under a disclosure document (RG 254). RG 38.47 When advertising or providing information, offerors still need to ensure that they comply with any other relevant laws, including the misleading or deceptive conduct and consumer protection provisions discussed at RG 38.11–RG 38.12. Offerors should also note ASIC’s guidance in relation to advertising financial products and services. Note: See Regulatory Guide 234 Advertising financial products and services (including credit): Good practice guidance (RG 234) for information on obligations relating to advertising or promotional material. Meaning of ‘because of’ in the hawking prohibition RG 38.48 Under s992A(1)(b), for a breach of the hawking prohibition to occur, the offer, request or invitation to the consumer must be made ‘because of’ or ‘in the course of’, an unsolicited contact. RG 38.49 An offer, request or invitation made during an unsolicited contact with a consumer will constitute one made ‘in the course of’ that contact: see paragraph 5.52 of the Explanatory Memorandum. RG 38.50 Paragraph 5.53 of the Explanatory Memorandum states that the words ‘because of’ limit the breadth of offers that are prohibited to those where there is a ‘causal nexus’ between the unsolicited contact and the offer, request, or invitation. In addition, the paragraph says that: …[T]he inclusion of the words ‘because of’ seeks to address the situation in which a person makes unsolicited contact with a consumer, but the actual offer, request, or invitation is made during subsequent contact that is solicited by the consumer. Page 18 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 18 RG 38.51 The prohibition may still apply to offers, requests, or invitations that take place through a medium other than one that is a real-time interaction. For example, emailing a consumer an offer during or directly after an unsolicited outbound sales call with them would likely be ‘because of’ that call. RG 38.52 Ultimately, whether the offer is caused by, or is a result of, the unsolicited contact, will depend on the facts and circumstances of each case: see paragraph 5.54 of the Explanatory Memorandum. RG 38.53 For example, the causal nexus will be broken if a consumer obtains personal advice about a product after the unsolicited contact, and subsequently consents to further contact in relation to that product: see paragraph 5.56 of the Explanatory Memorandum. RG 38.54 The causal nexus may also be broken if, between an unsolicited contact and subsequent offer, request or invitation, the consumer has: (a) taken active steps of their own accord to consent to further contact regarding the offer, request or invitation; (b) had a reasonable opportunity to consider any information that they have been provided about a financial product; and (c) had a reasonable opportunity to assess the product’s suitability prior to receiving the offer: see paragraph 5.55 of the Explanatory Memorandum. RG 38.55 If during the course of an initial unsolicited contact, an offeror pressures or manipulates a consumer into providing consent to future contact in relation to a financial product, then any such future contact would continue to be unsolicited: see paragraph 5.57 of the Explanatory Memorandum. RG 38.56 Generally, we consider that the following circumstances are unlikely, of themselves, to break the causal nexus: (a) the consumer obtaining general advice; (b) the consumer receiving a prospectus or PDS; or (c) the offeror providing a disclaimer to the consumer, or obtaining a declaration from the consumer, to the effect that the offer is not because of the initial unsolicited contact. Page 19 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 19 D Establishing consumer consent to be contacted Key points In order to make an offer, request, or invitation in relation to a financial product, an offeror must receive consent from a consumer to contact them. The consent must be: • positive and voluntary (see RG 38.63–RG 38.68); • clear and such that a reasonable person would have understood that the consumer consented to the contact (see RG 38.69–RG 38.78); and • given before the start of such contact (see RG 38.57–RG 38.59). This consent can be withdrawn at any time prior to or during the course of the contact: see RG 38.115–RG 38.121. In turn, the contact must: • relate to financial products specifically consented to, or that are reasonably within the scope of the consent (see RG 38.85–RG 38.107); and • be by a method of communication set out in the consumer’s consent, where this is specified (see RG 38.108–RG 38.110). The giving of consent generally RG 38.57 Under s992A(4)(b), contact with a consumer by an offeror is ‘unsolicited contact’ if the consumer did not consent to the contact. RG 38.58 Under s992A(5)(c) and (h), the consent must be given prior to the contact. The consent must not have been withdrawn before the contact occurs. RG 38.59 These requirements mean an offeror cannot elicit consent from a consumer for that or further contact: see paragraphs 5.72, 5.74 and 5.75 of the Explanatory Memorandum. RG 38.60 If a consumer’s consent indicates the form of contact that the consumer wants, an offeror may only contact them in that form: see s992A(5)(f). RG 38.61 Consent will be unsolicited unless it takes place after a consumer has given consent that is positive, voluntary, and clear. That consent must also be such that a reasonable person would have understood that the consumer was consenting to the contact: see s992A(5)(d)-(e), and paragraph 5.22 of the Explanatory Memorandum. Page 20 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 20 RG 38.62 A consumer may consent to a meeting, telephone call or other real-time interaction for one or more purposes, and the consent could take a number of forms. The consent may relate to a single instance or multiple instances of contact—for example, a request to receive telephone calls for a particular purpose over a period of time, not exceeding six weeks. In any case, the consent obtained should be positive, voluntary, and clear. Consent must be positive and voluntary RG 38.63 Under s992A(5)(d), offerors may only rely on a consumer’s consent to be contacted if it is positive and voluntary. Positive consent RG 38.64 Positive consent involves an active step by the consumer, such as initiating contact with the offeror through a telephone call or online form: see paragraph 5.75 of the Explanatory Memorandum. This involves a conscious decision by the consumer, and cannot be given through silence or a failure to act. RG 38.65 Consent cannot be provided in response to a leading question: see paragraph 5.76 of the Explanatory Memorandum. This includes situations where a leading question is used to attempt to obtain a renewal of consent. RG 38.66 Generally, positive consent may involve either: (a) consent sought through a standalone communication or interaction that demonstrates the consumer’s decision; or (b) where consent is sought in a broader discussion or larger document (e.g. forms relating to a separate product or service), clearly bringing to the consumer’s attention the consent being sought, such that it allows for an express decision to be made: see paragraph 5.73 of the Explanatory Memorandum. RG 38.67 A consumer’s failure to act does not constitute a positive act of providing consent for the contact: see paragraph 5.76 of the Explanatory Memorandum. For example, the fact that a consumer did not opt-out of receiving future telephone calls when given an opportunity to do so on an application form will not, on its own, mean that subsequent telephone calls from the offeror are solicited: see Example 11. Example 11: Opt-out notices Good Deal Derivatives recently bought a client book from a dormant over the counter (OTC) derivatives dealer, Dazzling Derivatives, to obtain new clients for their business. As a dormant dealer, Dazzling Derivatives has not made contact or sought consent from any clients in the last year. Page 21 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 21 Good Deal Derivatives sends a letter to all individuals whose contact details it has acquired. In the letter, Good Deal Derivatives asks them to respond if they wish to opt-out of future financial product offers. A week later, Good Deal Derivatives calls all individuals in the client book, inviting them to start trading OTC derivatives using their platform. None of the recipients of the letter responded prior to receiving the telephone call. By telephoning these individuals with an invitation, Good Deal Derivatives has breached the hawking prohibition. The consumers did not clearly and positively consent to this real-time interaction. Failure to respond or an absence of objection does not constitute consent to be contacted by the offeror. Previous consents that may have been granted by individuals in relation to offers from Dazzling Derivatives would have expired six weeks after they were given. In any event, such consents would not extend to offers from Good Deal Derivatives. Example 12: Follow-up phone calls Natasha makes a phone call to her bank to query a transaction on her account, and speaks with a customer service representative, Pierre. In the course of the conversation, Natasha mentions that she will be starting a new job the following week. The conversation progresses as follows: Pierre: That’s exciting! Natasha: Yeah … Pierre: Given you’ll be starting a new job soon, perhaps you would like some information on our income protection options and for us to draw up some quotes? Natasha does not respond. Pierre notices the silence, and continues: Pierre: I know you might not have time to talk about it now, but I’ll give you a call tomorrow and we can have a chat about it then. Pierre calls Natasha the following day to make an offer for income protection. Pierre’s conduct has breached the hawking prohibition because the call on which the offer was made was unsolicited, as it did not take place in response to positive consent. Natasha did not decline Pierre’s proposed course of action, but this does not constitute positive consent. Voluntary consent RG 38.68 The consumer must have voluntarily made the decision to be contacted. A consent is not valid if the consumer was forced, pressured, or manipulated into consenting to be contacted by an offeror, or induced to contact the offeror, so the consumer could, for example, receive another service or take up another opportunity: see paragraphs 5.57, 5.75, and 5.77 of the Explanatory Memorandum, Example 13 and Example 14. This includes situations where the consent is to further or future contact in which an offer is to be made: see Example 15. Page 22 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 22 Example 13: Timeshare presentation A promoter has a stall at a shopping centre with a banner about free movie tickets. The promoter approaches a consumer, Peter, about participating in a survey on holiday destinations and hearing information about holidays. The promoter offers Peter free movie tickets in return. The survey will take place at a nearby venue. Peter goes to the venue and is told that the survey will take place at the end of a presentation and the free movie tickets will be handed out then. Peter discovers that the presentation is about a time-sharing scheme and is invited to apply for an interest in the scheme during the presentation. Peter did not provide voluntary consent because it was not made clear that the consent being sought was for contact in relation to an offer to purchase an interest in a time-sharing scheme. In any case, the offer is ‘because of’ the promoter’s initial, unsolicited contact with the consumer. Had the promoter properly informed Peter that the presentation was for the purposes of offering interests in, or inviting or requesting applications for interests in, a time-sharing scheme, then consent given by Peter would have been voluntary. Example 14: Price comparison website Hong wants to switch comprehensive car insurers. He searches the internet for more information and finds an insurance price comparison website, ‘Best Price Compare’. The homepage shows the logos of ten different insurance providers and describes the insurance that they offer. Hong clicks on a button that reads ‘Compare your quotes’. Once he clicks on this button a dialogue box appears: ‘By providing your details to Best Price Compare you are consenting to be contacted by telephone about offers of comprehensive car insurance by our Best Price Compare members. Do you wish to proceed?’ Hong wants to receive the quotes from Best Price Compare so answers ‘yes’ and proceeds to fill out his details on a webform, and submits it. He then compares the quotes that now appear on the page. Hong subsequently receives a telephone call from three of the member insurance providers offering to complete the purchase process. These calls were solicited because Best Price Compare has made it clear to consumers that by answering ‘yes’ and filling out the form they will be contacted by telephone by Best Price Compare’s member insurance providers. Hong has taken positive action by acknowledging that he consents to being contacted by the member insurance providers, and subsequently voluntarily submitted his details on the webform. Page 23 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 23 Example 15: Eliciting consent for further contact Lerato calls Zaff Bank and asks for information about their term deposits and speaks with a sales representative, Akeno. At the end of the call, unprompted by Lerato, Akeno asks: ‘Can I call you tomorrow to discuss the superannuation products we offer?’ Lerato agrees. The following day, Akeno calls Lerato and in the course of the call invites him to apply for a superannuation product, ‘Zaff MySuper’. This constitutes an unsolicited invitation to apply, despite Lerato’s consent to receive the call. This is because Akeno’s question elicited Lerato’s consent for the subsequent call: see paragraph 5.57 of the Explanatory Memorandum. Offerors cannot rely on consent that has been elicited. Had Akeno asked Lerato if there is anything else he wishes to discuss, and Lerato had positively, clearly and voluntarily indicated that he would like to discuss superannuation and that he would like a follow-up call, then the telephone call to Lerato the following day would not have been elicited. Consent must be clear and reasonably understood RG 38.69 Under s992A(5)(e), a consumer’s consent must be clear, and such that a reasonable person would have understood that the consumer consented to the contact: see also paragraphs 5.79 and 5.81 of the Explanatory Memorandum. RG 38.70 This means that a consumer’s consent must demonstrate that they understand they are consenting to being contacted for the purpose of being offered, or invited to purchase or apply for, a financial product. For consent to be clear, it must not be vague or ambiguous: see paragraph 5.79 of the Explanatory Memorandum. RG 38.71 In addition, silence on the part of a consumer will generally not provide a clear basis for consent for contact in relation to the offer, request or invitation of a financial product. RG 38.72 The purpose of the contact being consented to by the consumer should be clear from the language used to communicate it. The consumer must have clearly stated either the type of financial product they are interested in discussing or the type of outcome they wish to achieve through a financial product: see paragraph 5.80 of the Explanatory Memorandum and RG 38.86–RG 38.106. This means that an offeror cannot rely on broad consent solicited from a consumer that does not specify products or a particular consumer need. Page 24 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 24 RG 38.73 The effect of s992A(5)(e) is that an offeror must be satisfied on a reasonable basis that the consumer was sufficiently informed so as to understand that: (a) they have provided consent to being contacted by the offeror; and (b) the contact may result in an offer of a financial product or a request or invitation to apply for a financial product (see paragraph 5.82 of the Explanatory Memorandum). Example 16: Vague or ambiguous language for consent Ahmad is looking for home contents insurance. He uses the instant chat box function on Sibylline Insurance’s website to enquire. Farah from Sibylline Insurance responds. During the instant chat exchange, Ahmad mentions he has just purchased an engagement ring. Farah indicates that Sibylline Insurance also offers personal valuables insurance. The following conversation then takes place: Ahmad: I don’t think I need personal valuables insurance. I’ll need to check. Farah: Well, I could call you tomorrow and run you through an application if you like? Ahmad: Ummm … I don’t know, maybe … Ahmad’s language does not indicate clear and positive consent to be contacted by Farah in relation to personal valuables insurance. If Farah calls Ahmad and offers him such a product, this contact would be unsolicited and would breach the hawking prohibition. If Farah was uncertain whether Ahmad properly understood that any subsequent telephone calls were for the purpose of signing up to personal valuables insurance, she could have simply provided further information about that insurance. RG 38.74 Whether there is a reasonable basis for considering a consumer to have understood what they are consenting to will depend on the circumstances in each case. For example, where a consumer begins filling out an online form but does not submit it, the partial supply of information does not provide a reasonable basis for considering the consumer to have consented to contact. RG 38.75 Equally, where a consumer is handed a pamphlet about a product without any context and asks what it is about and why they have been given it, this is not a reasonable basis for considering the consumer to have consented to contact. RG 38.76 It is unlikely that a consumer would understand what they are consenting to if they are incentivised to consent hastily to contact about a financial product (e.g. as part of the terms and conditions of entering a competition): see paragraph 5.83 of the Explanatory Memorandum and RG 38.97. Page 25 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 25 Example 17: Competition form A company runs a campaign where a consumer can fill in a form to enter a draw to win a new car. Small print contained in the lengthy terms and conditions attached to the form states that, by submitting their entry, the consumer consents to being called about the sale or offer of financial products. Any telephone calls for the offer or sale of financial products that take place as a result of the information provided on the form would be considered unsolicited. The company did not specifically, or separately, draw the consumer’s attention to being contacted about financial products. As a result, no reasonable person would likely have understood that the consumer had consented to contact in relation to the offer of financial products. RG 38.77 Where an offeror does not obtain consent personally from a consumer, because it is obtained through a third party (e.g. if they use a third party promoter or lead generator), it remains a matter for the offeror to establish that the consent was positive, voluntary, clear and reasonably understood prior to making an offer. An offeror may breach the prohibition even if they had not intended to rely on consent that had not been properly given by a consumer: see Example 18. Example 18: Website lead generator Taraji has heard on the news about a surge in retail securities trading and decides to search the internet for more information. A link for Quick Traders appears stating, ‘Learn about trading securities today!’. Taraji submits her contact details in a webform on the Quick Traders website. Taraji is surprised when she later receives a call from Zuri, a representative from Dealin’ Derivatives, who had used Quick Traders to generate leads. Zuri gives Taraji general information about securities trading, but in the course of this conversation invites Taraji instead to begin trading OTC derivatives using the Dealin’ Derivatives platform. Zuri’s invitation is unsolicited as it does not take place in response to a consent voluntarily given in relation to the invitation to trade financial products, or for that matter to be contacted about derivatives. This breach occurs regardless of whether Zuri believes that Quick Traders properly sought consent from Taraji. RG 38.78 As a matter of good practice, we suggest that offerors: (a) encourage consumers to specify which financial products or classes of financial products they wish to discuss; (b) provide consumers with enough information in a sufficiently prominent way so as to allow them to carefully consider whether to consent to the contact, and the form of that contact; and (c) if in doubt, clarify and/or confirm the scope of the contact to which the consumer gives consent. Page 26 REGULATORY GUIDE 38: The hawking prohibition © Australian Securities and Investments Commission September 2021 Page 26 Clarifying the scope of a consumer’s consent RG 38.79 It may be necessary to clarify or confirm the scope of the consumer’s consent where they use vague or ambiguous language, or where there may be a misunderstanding as to the function or purpose of a product. It may be the case that a clarification of the consumer’s stated purpose (and therefore scope of consent) results in an offer of a different product than had been initially proposed. Offerors should not use the process of clarifying the consumer’s objectives to artificially broaden or elicit consent. Note: For more information on ‘eliciting’, see paragraph RG 38.97. Example 19: Clarifying consent Ezekiel, who lives in Sydney, calls his insurer, Papaya Insurance