Obligations and Responsibilities of a Responsible Manager under an AFSL or ACL – Financial Services

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What is a Responsible Manager?

Responsible Managers are key persons in relation to an Australian Financial Services License or Australian Credit License (“Licensees“), but the term is not defined in the Companies Act 2001 (Cth) (“the act”). While the law establishes the obligation of licensees to maintain competence to provide the services authorized by the license, it is ASIC’s Regulatory Guides 105 and 206 which specify that these are the skills and knowledge of the responsible manager. who demonstrate this competence for the AFSL or Holder of the ACL.

A responsible manager (“RM“) is more than a person of good name and character. NCMs must be:

  • responsible for major day-to-day decisions regarding the continued provision of financial or credit services;

  • a fit and suitable person; and

  • have the appropriate knowledge and skills to cover all licensed products and services.

What are the obligations of an RM?

RG105 and 206 note that licensees must maintain and update the knowledge and skills of their responsible managers.

An RM can maintain their knowledge and skills by undergoing the following activities:

  • attend monthly or quarterly compliance meetings that cover the following:

  • general updates;

  • AML/CFT obligations;

  • communications with regulators;

  • new or changed regulatory requirements;

  • maintenance of policies/registries;

  • compliance program updates;

  • financial ressources;

  • representative updates; and

  • privacy, cybersecurity and marketing updates.

  • participate in a licensee’s continuing professional development program with other employees;

  • attend industry events, seminars and workshops;

  • attend industry association events and read association publications;

  • ensure RG146 compliance remains current (for AFSLs, where applicable);

  • become familiar with the various regulators responsible for overseeing their license and register for regulatory updates;

  • review a licensee’s license terms; and

  • where the licensee provides personalized advice to retail clients, ensuring that you meet the relevant training standards.

  • For ACL holders, RMs are responsible for ensuring that the company complies with the National Consumer Credit Protection Act 2009 (NCCP Law)

While RMs have a significant degree of seniority, the licensee’s managers have the ultimate responsibility for identifying the requirements and actions needed to maintain their license’s competence.

Sophie Grace suggests that all MRs have a training plan and meet regularly with licensee managers to ensure they are meeting training objectives and that proper records are kept.

What responsibility has an RM once appointed?

The role of RM is not defined in the Corporations Act and therefore being appointed RM does not entail any personal liability. When things go wrong, it is the Licensee, and its Administrators, who are subject to the regulatory consequences. That said, ASIC expects RMs to have the required internal knowledge to answer ASIC’s various questions regarding the licensee’s internal compliance functions.

Additionally, being appointed as an RM raises two other possibilities that expose an RM to liability:

  1. your involvement in any violation of the law could result in a restraining order. ASIC has the power to prohibit any person from providing financial or credit services if they are not a fit and proper person.

  2. your appointment as an RM may meet the definition of “officer” under the Corporations Act, where you have the required level of involvement. This will be determined primarily by the relevant circumstances and how ASIC interprets those circumstances.

These possibilities are largely determined by the facts in relation to any determination of liability and the RM’s contract or consulting agreement with Licensee, which means that an RM may also be liable for breach of contract.

What does this mean for RMs?

An RM should ensure they are aware of their responsibilities as outlined in their employment contract or consultancy agreement. An RM must also maintain competence, exercise good character and good judgment, and avoid any conflict of interest in performing their role.

RMs should understand their role and ensure that Licensee and its administrators implement appropriate policies and procedures to ensure compliance with license terms, laws, and ASIC guidelines.

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