Australian Securities & Investments Commission Brings Criminal Charges Against Commonwealth Bank of Australia Subsidiary for “Hawking” Violations

On October 4, the Australian Securities & Investments Commission (ASIC) announced that it had brought criminal charges against Colonial Mutual Life Insurance Society Ltd (CommInsure), a subsidiary of leading Australian bank Commonwealth Bank of Australia (CBA), under the “hawking” (cold-calling) provisions in section 992A of the Corporations Act 2001. ASIC alleged that on 87 occasions between October and December 2014, CommInsure, through its agent (telemarketing firm Aegon Insights Australia Pty Ltd (Aegon)), unlawfully sold life insurance policies known as Simple Life over the telephone, and that CommInsure provided customer contact details to Aegon from CBA’s existing customer database.

Subsection 992A(1) of the Corporations Act generally prohibits “offer[ing] financial products for issue or sale in the course of, or because of, an unsolicited meeting with another person.”  Subsection 992A(3) of the Act provides certain exceptions to the general prohibition (e.g., the call recipient must receive a Product Disclosure Statement before becoming obligated to purchase the financial product being offered).  In this case, ASIC alleged “that the calls to CBA customers were unsolicited, and that CommInsure did not comply with all of the hawking exceptions in section 992A(3) of the Corporations Act.”

Each violation of section 992A by a corporate entity is punishable by a fine equating to 125 penalty units (AUD$21,250).  If convicted on all counts, CommInsure would be fined up to AUD $1.785 million.

N.B.:  This prosecutions has attracted attention in the Australian media because criminal charges for hawking violations are reportedly rare.  As Reuters reported, however, during the 2018 Australian Royal Commission inquiry into financial sector misconduct, “other insurers admitted to habitually breaking anti-hawking laws.”  One life insurance company, Clearview Group, admitted to violating the hawking provisions more than 300,000 times, and to “targeting poor and vulnerable individuals.”  In response, ASIC had indicated in July 2109 “that it was planning to have the country’s top lenders prosecuted for overly aggressive sales of insurance products.”

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