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

What is a Responsible Manager?

Responsible Managers are key people in relation to an Australian Financial Services Licence or Australian Credit Licence (“Licensees”), however the term is not defined in the Corporations Act 2001 (Cth) (“the Act”). Whilst the Act sets out the obligation of licensees to maintain the competence to provide the services authorised by the licence, it is ASIC’s Regulatory Guide 105 and 206 which make clear that it is the Responsible Manager’s skills and knowledge which demonstrate this competence for the AFSL or ACL holder.

A Responsible Manager (“RM”) is more than just an person of good fame and character. RMs must be:

  • responsible for the significant day-to-day decisions about the ongoing provision of financial or credit services;
  • a fit and proper person; and
  • have the appropriate knowledge and skills to cover all products and services authorised by the licence.

What are the obligations of a 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:

  • attending monthly or quarterly compliance meetings which cover the following items:
  • general updates;
  • AML/CTF obligations;
  • communications with regulators;
  • new or changed regulatory requirements;
  • maintenance of policies/registers;
  • compliance program updates;
  • financial resources;
  • updates relating to representatives; and
  • privacy, cyber security and marketing updates.
  • participating in a Licensee’s continuing professional development program along with other employees;
  • attending industry events, seminars and workshops;
  • attending industry association events and reading association publications;
  • ensuring RG146 compliance remains up to date (for AFSLs where relevant);
  • familiarising themselves with the various regulators responsible for oversight of their licence and signing up to regulatory updates;
  • reviewing a Licensee’s licence conditions; and
  • where the Licensee provides personal advice to retail clients, ensuring you meet the relevant training standards.
  • For ACL holders, RMs are responsible for ensuring that the company is compliant with the National Consumer Credit Protection Act 2009 (NCCP Act)

Whilst RMs have a significant degree of seniority, the Directors of the Licensee ultimately have responsibility for identifying the requirements and measures needed to maintain competence of their licence.

Sophie Grace suggests all RMs are subject to a training plan and meet regularly with the Directors of the Licensee to ensure they achieve training targets and appropriate records are kept.

What liability does a RM have once appointed?

The role of RM is not defined within the Corporations Act and therefore being appointed as RM does not attract any personal liability. When things go wrong, it is the Licensee, and its Directors, which are subject to regulatory consequences. In saying that, ASIC has expectations that RMs will have the required internal knowledge to respond to various questions from ASIC regarding the internal compliance functions of the Licensee.

Further, being appointed as RM raises two further possibilities that expose a RM to liability:

  1. your involvement in any contravention of the law could give rise to a banning order. ASIC has the power to ban any person from providing financial or credit services if they are not a fit and proper person.
  1. your appointment as RM may meet the definition of “officer” under the Corporations Act, where you have the requisite level of involvement. This will be determined primarily by relevant circumstances and how ASIC interprets these circumstances.

These possibilities are largely determined by the facts in relation to any determination of liability and the RM’s contract or consultancy agreement with the Licensee, meaning, a RM may also be liable for non-performance of the contract.

What does this mean for RMs?

An RM must ensure that they are aware of their responsibilities as contained in their employment contract or consultancy agreement. An RM must also maintain competency, demonstrate good character and judgement and avoid any conflicts of interests in the performance of their role.

RMs should understand their role and ensure that the Licensee and its directors implement appropriate policies and procedures to ensure compliance with the licence conditions, legislation and ASIC guidance.

Further Reading:

How can we assist?

Sophie Grace can assist you with all aspects of Australian financial services or credit licensing. You can find out more about the requirements for assessing an RM’s requirements for AFSLs and Credit Licences on our website.

We can also assist you with ongoing compliance upon receiving your Australian financial services licence or credit licence from ASIC. Further information can be found on our website or by contacting us.

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