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Is ASIC inappropriately hamstringing text messages to clients?

By Mike Taylor6 September 2021

The status of text messages between advisers and their clients has been brought into question in the context of the Government’s proposed new anti-hawking provisions, with the Stockbrokers and Financial Advisers Association (SFAA) pointing out that one size will not fit all.

In a response to an Australian Securities and Investments Commission (ASIC) consultation paper, the SFAA makes clear that the use of text messages has become an integral part of communications between investment advisers and their clients but the practice is now at risk of being adversely caught up in the regulator’s proposed anti-hawking approach.

One of the biggest issues arising from the new provisions is that conduct that would have been previously exempted will now be captured if the adviser is providing general advice.

“SFAA’s members currently use phone calls, email and text messages to communicate with clients,” the response said. “Our members’ anticipate the following practical issues raised by the prohibition in respect of these forms of communication:

  • Not all stockbroking or investment advice firms record telephone calls.
  • Advisers rarely use scripts when speaking to clients.
  • General advice that formerly was not caught by anti-hawking now is.
  • An adviser may contact a client and provide both personal and general advice which makes the dividing line difficult to police.

“This makes monitoring and supervising the hawking provision challenging,” it said.

“Additionally, we seek clarification on whether text messaging and SMS is considered ‘real time’ or not. We seek further guidance and clarity on the scope of what information can be provided to a client where there is no expectation of a real-time response.”

The SFAA said that due to the popularity of using text messages it was seeking clarification about whether text messages are considered ‘real-time interactions that are in the nature of a discussion or conversation’ and accordingly captured by the hawking prohibition.

“The requirement that the consent provided by the client not be more than six weeks old is completely inappropriate and unworkable for stockbrokers and investment advisers. While it may be appropriate in the context of the sale of car insurance for example, which is a one-off transaction, it does not suit the stockbroking and investment advice industry where advisers have an ongoing relationship with their clients who expect them to contact them regarding stocks they hold as well as those in which they may have an interest,” it said.

“Requiring a client to renew their consent every six weeks is unworkable. As well as being costly to implement it would result in stockbroking and investment advice firms spending all their time chasing client consents and monitoring whether consents are up to date. Advisers would be unable to contact the clients to chase the consent as to do so may breach the provisions if they discuss listed securities with their clients. This requirement will also have significant impacts on retail clients who will not understand why they have to provide written consent every six weeks to enable their investment adviser or stockbroker to contact them to discuss their stocks.”

“An example where the proposed six week consent requirement is unworkable is in the area of capital raising. Stockbrokers and investment advisers contact retail clients to make them aware of capital raisings such as rights issues and placements. These issues have tight timeframes in which to respond. A requirement that advisers can only contact retail clients who have provided written consent within the previous six weeks will make it impossible to contact the client base who may be interested in participating. Retail shareholders are already disadvantaged as regards participation in capital raisings when compared to institutional investors. These requirements will only make it harder for retail clients to participate in capital raisings.”

“Stockbrokers and investment advisers should be carved out of the consent requirements altogether so that the current situation applies. Alternatively, a 12-month consent period would be preferable,” the SFAA response said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Observer
9 months ago

ASIC has rarely shown any understanding of the realities of the industry.