Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (135 of 2020)

Schedule 5   Hawking of financial products

Part 1   Main amendments

Corporations Act 2001

2   Sections 992A and 992AA

Repeal the sections, substitute:

992A Prohibition on hawking of financial products

General prohibition

(1) A person must not offer a financial product for issue or sale to another person (the consumer ), or request or invite the consumer to ask or apply for a financial product or to purchase a financial product, if:

(a) the consumer is a retail client; and

(b) the offer, request or invitation is made in the course of, or because of, an unsolicited contact with the consumer.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

Exceptions

(2) Subsection (1) does not apply to:

(a) an offer, request or invitation made in the course of the giving of advice to the consumer by a person who is required under Division 2 of Part 7.7A to act in the best interests of the consumer in relation to the advice; or

(c) an offer, request or invitation of a kind prescribed by the regulations.

Note 1: A defendant bears an evidential burden in relation to the matters in this subsection. See subsection 13.3(3) of the Criminal Code.

Meaning of unsolicited contact

(4) Contact by a person with the consumer, in connection with a financial product, is unsolicited contact with the consumer in connection with the product if:

(a) the contact is wholly or partly in one or more of the following forms:

(i) a telephone call;

(ii) a face-to-face meeting;

(iii) any other real-time interaction in the nature of a discussion or conversation; and

(b) either:

(i) the consumer did not consent to the contact; or

(ii) if the consumer consented to the contact - the requirements of subsection (5) are not met.

(5) For the purposes of subparagraph (4)(b)(ii), the requirements are:

(a) in the case of an offer of that 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; and

(b) 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; and

(c) the consumer gave the consent before the start of the contact; and

(d) giving the consent was a positive and voluntary act of the consumer; and

(e) the consent was clear, and a reasonable person would have understood that the consumer consented to the contact; and

(f) if the consent indicated the form of contact that the consumer wants - the contact is in that form; and

(g) the consent was given:

(i) within 6 weeks before the contact occurs; or

(ii) 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

(h) the consent was not withdrawn before the contact occurs.

For the purposes of this subsection, take into account any variations that the consumer makes to the consent before the contact occurs.

(6) The consumer may vary or withdraw the consent at any time. The variation or withdrawal may take any form, regardless of the form of the consent.

(7) To avoid doubt, advertising an offer, or publishing a statement about an offer, is not unsolicited contact if:

(a) because of subsection 734(4), (5), (6), (7), (8) or (9), the advertisement or publication does not contravene subsection 734(2); or

(b) because of paragraphs 1018A(1)(c) to (e), or because of subsection 1018A(3), (4) or (5), the advertisement or publication does not contravene subsection 1018A(1); or

(c) because of paragraphs 1018A(2)(c) to (f), or because of subsection 1018A(3), (4) or (5), the advertisement or publication does not contravene subsection 1018A(2).

Application of this section to superannuation products

(8) This section, and regulations made for the purposes of this section, apply to financial products that are beneficial interests in a regulated superannuation fund as if each class of beneficial interest in the fund were a separate financial product.

Strict liability

(9) An offence based on subsection (1) is an offence of strict liability.

992AA Right of return and refund for hawked financial products

(1) If a person (the issuer ) contravenes section 992A in relation to a financial product issued or sold to another person (the consumer ), the consumer has a right of return and refund exercisable at any time during the period starting when the financial product was issued or sold and ending:

(a) if, under section 1019B, the consumer has a right to return the financial product within a particular period - 1 month after the end of that period; or

(b) otherwise - 1 month and 14 days after the financial product was issued or sold.

(2) If the financial product is returned under subsection (1):

(a) if the financial product is constituted by a legal relationship between the consumer and the issuer - by force of this section, that relationship is terminated, with effect from the time of the return, without penalty to the consumer; and

(b) by force of this section, any contract for the acquisition of the product by the consumer is terminated, with effect from the time of the return, without penalty to the consumer; and

(c) such additional consequences (which may include the imposition of additional obligations) apply as are specified in the regulations.

(3) However:

(a) this section does not apply in relation to a financial product included in a class of financial products that the regulations exclude from this section; and

(b) if the regulations provide that this section applies in relation to a class of financial products only if specified additional requirements are satisfied - this section does not apply in relation to a financial product included in that class unless those requirements are satisfied; and

(c) in circumstances specified in the regulations, this section does not apply to any financial product.

(4) This section, and regulations made for the purposes of this section, apply in relation to financial products that are beneficial interests in a regulated superannuation fund as if each class of beneficial interest in the fund were a separate financial product.

(5) This section applies in addition to any other penalties for or in relation to breaches of section 992A.