Responsible managers (RMs) are the people that the licensee relies on to prove to ASIC that it can competently operate a financial services business. They are required to make significant day-to-day decisions for the licensed operations and play an important role in ensuring that licensees operate in accordance with their obligations and regulatory requirements in Australia.
A responsible manager is expected to assess strategies and policies used within the business and ensure that they are consistent with the obligations of the licensee – extract from ASIC Media Release 22-366 MR.
A RM’s roles and responsibilities will vary depending on their education, qualifications and/or experience and their positions in the licensee. All RMs must understand the investment strategies of the companies that they work for. They should be involved in the development and implementation of company policies and procedures although they may not be involved in the actual operations of a licensee. They must have a broad understanding of relevant regulatory requirements so that they can ensure that the policies and procedures that are implemented meet those regulatory requirements.
Many RMs are not compliance experts but may have a broad understanding of regulatory requirements. Where there is a lack of compliance expertise by either the responsible manager or elsewhere within the organisation, the responsible manager must advise the licensee to access compliance expertise either by employing staff who have compliance expertise, or by engaging suitable consultants to ensure that the licensees can comply. A licensee’s breaches reflect the lack of competency of their responsible managers because it means that the responsible managers failed to draw the attention of the licensees to their areas of weakness and the need to have sufficient resources to address those deficiencies.
To maintain their competencies and expertise, RMs must continuously undertake appropriate training. Ongoing continuing professional development must be related to their individual roles and responsibilities. RMs who are engaged on a consultancy basis should maintain levels of expertise that are relevant to the competencies that they supply to the licensees. Different responsible managers engaged by a licensee could require different training.
RMs should check that their licensees lodge applications, notifications and reports to ASIC and other regulatory bodies in a timely manner. It is useful for licensees to have a form of compliance calendar that will identify the schedule of tasks and reports for each month thus providing reminders and alerts to complete tasks on time.
RMs are expected to be a part of senior management and to have a supervisory and monitoring role. They should check whether representatives comply with regulatory requirements in performing their tasks and whether they adhere to the company’s policies and procedures. Where checks reveal deficiencies, RMs can assist licensees to identify staff training needs or deliver the necessary training.
Licensees who have a small, less complex business with low staff numbers and few, or just one, financial products or services may need only one RM. If a licensee wishes to be authorised for a broad range of financial products and services, it must ensure that it either has a sole RM who meets all the competency requirements or several RMs who together possess all the competencies required. Having more than one RM can lower the risk of the licence being suspended or cancelled if that sole responsible manager leaves the licensee.
If ASIC considers that a RM is essential to supply their competencies to a licensee, then this RM will be named as a key person in the licence. Only ASIC can appoint a key person. A person who does not meet the competency requirements to be a RM would not be appointed a key person.
RMs may be located overseas but at least one RM must be based in Australia. ASIC will process the appointments of RMs if the application is complete but it will notify the licensee:
“Please note that ASIC has not formed a view on whether the Licensee’s responsible managers provide the organisational competence required by s912A(1)(e) of the Corporations Act 2001.”
This leads to confusion because a person may think that they are a responsible manager and approved by ASIC for their responsible manager role. In reality, their licensee cannot rely on them to provide the necessary competencies for the licence authorisations until ASIC makes the assessment and determines that the person is suitable to be a responsible manager.
There are five options listed in the ASIC Regulatory Guide 105 for assessing the competency of a person. All of them require certain years of relevant experience either gained in Australia or gained overseas in a country whose regulatory regime is recognised by ASIC. If a person does not meet any of the five options, we recommend against using the title of responsible manager. This can mislead others into thinking that that person has been assessed by ASIC and that they possess the necessary qualifications and/or experience that the licensee can rely on.
This article is not legal advice. If you have queries regarding the appointment of proposed responsible managers for your licence application, please contact Know Compliance on (03) 9689 1186 or email admin@knowcompliance.com.au for a free initial discussion. We can also assist you to make applications to ASIC for a new Australian Financial Services Licence or vary your existing licence. Our services include making applications to add or remove responsible managers and removing the key person clause.