The Australian Securities and Investments Commission (ASIC) has issued new guidance aimed at unlicensed entities and Australian financial services (AFS) licensees, focusing on unsolicited contact leading to financial advice.

Information Sheet 282 (INFO 282) details the legal responsibilities and compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term requirements for entities engaging in unsolicited and digital contact with consumers, emphasizing the need for adherence to financial services laws.

ASIC Issues New Guidance for AFS Firms on Unsolicited Financial Advice

INFO 282 underscores the necessity for both unlicensed entities and AFS licensees to ensure their conduct aligns with the law when making unsolicited or digital contact with consumers.

“These entities must comply with financial services laws. If they don’t, they risk substantial penalties,” the ASIC commented.

Key areas of focus include:

• Unsolicited Contact: Entities must be cautious of how their interactions with consumers might be classified under financial services laws. If the engagement leads to financial product advice or arranging to deal with financial products, an AFS license or appropriate authorization is required.
• Digital Contact: Online and social media interactions that result in financial product advice or dealing by arranging are subject to similar scrutiny and requirements as traditional unsolicited contact.

We have published a new information sheet outlining how financial services laws apply to unlicensed entities referring consumers to a third party for the provision of financial advice https://t.co/BGLdINLBrI pic.twitter.com/RARSQBs1Ep

— ASIC Media (@asicmedia) May 15, 2024

ASIC highlights that breaches of these requirements, such as operating without an AFS license, carry significant penalties under the Corporations Act 2001. Individuals face up to five years imprisonment and/or fines up to 600 penalty units, while corporations can incur fines up to 6,000.

Examples of Non-Compliance

Entities facilitating financial transactions, influencing consumer decisions, or engaging in digital interactions related to financial advice likely require an AFS license or appropriate authorization.

“The release of this information sheet forms part of ASIC ASIC The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the Read this Term’s broader work to minimize consumer harm caused by cold calling business models using high-pressure sales tactics and online click-bait advertisements to lure consumers into receiving often inappropriate superannuation switching advice,” the regulator added.

High-pressure cold-calling tactics have previously caught the regulator's attention, leading to a special warning issued at the beginning of this month.

ASIC provided three detailed examples to illustrate potential non-compliant behaviors.

• Assisting in financial product transactions: If an entity's actions facilitate the acquisition or disposal of a financial product, and their remuneration is tied to the consumer's decisions, it is likely they are dealing by arranging, which mandates an AFS license.
• Influencing consumer decisions: Entities influencing consumers' financial decisions, even without direct involvement in transactions, may provide financial product advice and require appropriate authorization.
• Digital interaction: Websites offering superannuation performance comparisons and subsequent consumer engagement that leads to financial advice are also likely to be considered for providing financial product advice and dealing by arranging.