If you are carrying on a business in Australia that provides financial services, then unless an exemption applies, you will likely need an Australian Financial Services Licence (AFSL). An AFSL holder has an obligation to always maintain organisational competence. You can demonstrate this by relying on the knowledge and skills of the people who manage your business operations. Therefore, having the right ‘Responsible Manager’ for your financial services business is important. This article explains what a responsible manager is and how your company can engage with one.
What is a Responsible Manager?
A Responsible Manager is a key person appointed by a business holding an AFSL. Through the Responsible Managers, an AFSL holder demonstrates to ASIC that it has the knowledge, skills and experience required to provide the financial services it is authorised to provide under its AFSL.
In relation to AFSLs:
- you must nominate at least one Responsible Manager to ASIC when you apply for a new AFSL;
- you must nominate your Responsible Managers to ASIC when you apply to vary an AFSL (for example, when you vary the financial services or financial products you offer);
- you must notify ASIC if you change any of your Responsible Managers (for example, if a Responsible Manager leaves the business or if you replace a Responsible Manager); and
- ASIC may, at any time, may ask you about your Responsible Managers if they conduct a surveillance visit on your business.
What are the Requirements to be a Responsible Manager?
Broadly, Responsible Managers must have all of the knowledge and skills:
- pass a ‘fit and proper’ test;
- do the following:
- directly supervise the financial services provided by the business;
- be directly responsible for significant day-to-day decisions about the provision of financial services by the business;
- demonstrate organisational competence in the authorisations under the AFSL; and
- demonstrate having at least one of the following requisite skills, knowledge and experience:
| Option 1 | Meet a widely adopted and relevant industry standard or relevant standard set by APRA, and have a minimum of three years relevant experience over the last five years providing financial services under an AFSL with similar authorisations; or |
| Option 2 | Be individually assessed by an authorised assessor as having relevant knowledge equivalent to a diploma (e.g. Advanced Diploma in Financial Services), and have a minimum of five years relevant experience over the last eight years providing financial services under an AFSL with similar authorisations; or |
| Option 3 | Hold a university degree in a relevant discipline (e.g. Bachelor’s Degree in either Business, Commerce, Economics or Finance) and complete a relevant short industry course, and have a minimum of three years relevant experience over the last five years providing financial services under an AFSL with similar authorisations; or |
| Option 4 | hold a relevant industry or product-specific qualification equivalent to a diploma or higher (e.g. Advanced Diploma in Financial Services or Bachelor’s Degree in either Business, Commerce, Economics or Finance), and have a minimum of three years relevant experience over the last five years providing financial services under an AFSL with similar authorisations; or |
| Option 5 | provide a written submission that satisfies ASIC that the Responsible Manager has appropriate knowledge and skills for their role. The submission must cover all of the information in RG 105.71. Some example situations where ASIC may or may not accept a Responsible Manager through this method is outlined at RG 105.74. |
Other Requirements
Responsible Managers must also meet all of the following:
- provide at least two business references who can attest to their financial services experience and good fame and character;
- (if the business provides personal advice to retail clients) meet the ‘Financial Adviser Standards’, which includes ongoing professional development obligations;
- (if the business provides general advice to retail clients) have the relevant training and education for each financial product authorised under the AFSL, as set out in RG 146;
- have clear police checks (dated within the last 12 months);
- have clear bankruptcy checks (dated within the last 12 months); and
- have no association with more than one other AFSL, either as Responsible Manager, director or shareholder.
How Do You Engage a Responsible Manager?
AFSL holders typically engage Responsible Managers in one of the following capacities:
- as an employee;
- as a director; or
- as a contractor, provided the business can demonstrate that it does not have in-house competency.
It is important that you engage the Responsible Manager in a written agreement and have the Responsible Manager’s job description documented in that agreement.
Ongoing Obligations Concerning Responsible Managers
Before engaging a Responsible Manager, it is important to ensure that the person:
- meets the above requirements to be a Responsible Manager;
- has the time or capability to do the role properly;
- has a job description that carefully defines the person’s role and responsibilities; and
- is given the authority and autonomy to exercise those responsibilities properly.
As an AFSL holder, you must also ensure that you continually demonstrate organisational competence, especially concerning your Responsible Managers. Some commonly adopted procedures to meet these obligations include:
- having frequent meetings with a regular agenda item to consider any changes to your business activities or your Responsible Managers;
- having a succession plan for your Responsible Managers, especially those that have expertise in your key financial services or financial services;
- maintaining and updating an internal Responsible Manager register that sets out each Responsible Manager’s knowledge, skills and the financial services or products for which they are demonstrating organisational competency;
- maintaining records of any reviews you have completed and changes you have made to your organisational competence; and
- taking steps to ensure your Responsible Managers continue to be fit and proper. This might look like conducting periodic criminal history and bankruptcy checks, providing access to ongoing professional development courses, and seeking professional advice where required.
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Key Takeaways
If you are carrying on a business in Australia that provides financial services, you will likely need an AFSL and at least one Responsible Manager for your business. Through the Responsible Managers, you will be demonstrating to ASIC that you have the knowledge, skills and experience required to provide the financial services you are authorised to provide under your AFSL. Therefore, it is important that you are aware of the eligibility criteria to be a Responsible Manager. Likewise, you must engage the Responsible Manager appropriately. Further, you will have ongoing obligations concerning your Responsible Managers and must continually meet these obligations.
Frequently Asked Questions
A Responsible Manager is a key person appointed by a business holding an AFSL. Through the Responsible Managers, an AFSL holder demonstrates to ASIC that it has the knowledge, skills and experience required to provide the financial services it is authorised to provide under its AFSL.
As an AFSL holder, you must ensure that you continually demonstrate organisational competence. Some commonly adopted procedures to meet these obligations include having frequent meetings with your Responsible Managers and having a succession plan for them.
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