RESPONSIBLE MANAGERS IN A NUTSHELL

Having the right Responsible Managers is important to maintaining and managing a financial services business, but who are the right people to be your Responsible Managers.

Who is a Responsible Manager?

An AFS licence holder has an obligation to always maintain organisational competence. This is demonstrated by relying upon the knowledge and skills of the people who manage the business operations.  These people are known as Responsible Managers. This is an artificial role designed by ASIC to determine whether a licensee has organisational competence when assessing licence applications.   

What is a Responsible Manager’s Role?

Responsible Managers should be directly responsible for the significant day-to-day decisions about the ongoing provision of financial services. This means the people in your business who:

• Are responsible for the quality of your financial services; and
• Decide how your financial services are provided and supervise the provision of those services.

Responsible Managers can act in one or all of the following capacities for an AFS licensee:

• As an employee or authorised representative;
• As a director; or
• Purely as a contractor to be a Responsible Manager in circumstances where the licensee does not have the organisational competency inhouse.

So before accepting (or continuing in) a role as a Responsible Manager, make sure that:

• You have the time or capability to do the role properly;
• Your job description carefully defines your role and responsibilities as a Responsible Manager;
• You’re given the authority and autonomy to properly exercise those responsibilities – otherwise you could be liable for something that is outside your control;
• The licensee has adequate compliance arrangements or a keen appetite for improving them.

Who is not a Responsible Manager?

Senior executives responsible for business operations, such as a chief financial officer, risk manager, or HR manager, are unlikely to have the level of direct responsibility for the provision of financial services that would be expected of a Responsible Manager. This will, of course, depend on the size and scale of the business. In some small businesses, the Responsible Manager may be the managing director, and in larger businesses it could be someone in a middle management position that has the responsibility for overseeing the significant day-to-day decisions about the ongoing provision of financial services.


Who Qualifies as a Responsible Manager?

Whether a Responsible Manager has the knowledge and skills to fulfil the role comes down to whether the person qualifies under one of 5 prescribed pathways set by ASIC. These can be quite rigid and usually require the person to have the same or similar experience in the financial services for which they are demonstrating organisational competency.

The 5 prescribed pathways are:

1. The person meets a widely adopted industry or relevant APRA standard and has 3 years’ relevant experience over the past 5 years;
2. The person is individually assessed by an authorised assessor as having relevant knowledge equivalent to a diploma and 5 years’ relevant experience over the past 8 years;
3. The person holds a university degree in a relevant discipline and has completed a short industry course, and 3 years’ relevant experience over the past 5 years;
4. The person holds an industry or product specific qualification equivalent to a diploma and 3 years’ relevant experience over the past 5 years;
5. If the person does not fit into any of the above 4 options then this option can be used by providing ASIC with a submission to demonstrate the responsible manager’s relevant experience over the past 10 years.

Responsible Managers must also be ‘fit and proper’. This is demonstrated by supplying ASIC with two business references and criminal history and bankruptcy checks, and completing ASIC’s statement of personal information form.

ASIC may have concerns over whether a person is fit and proper to be a Responsible Manager if:The nominated Responsible Manager has had an AFS or credit licence suspended or cancelled;

• A banning or disqualification order has been made by a court against the nominated Responsible Manager;
• The nominated Responsible Manager has been disqualified from managing corporations;The nominated Responsible Manager has been banned from engaging in any credit activity under a State or Territory law;
• The nominated Responsible Manager has ever been linked to a refusal or failure to give effect to a determination made by AFCA;
• The nominated Responsible Manager has been convicted of an offence in the last 10 years.

Compliance

When Responsible Managers or business activities change, your organisational competence must be reviewed to ensure that the licence holder continues to meet its organisational competence obligation.  

Some compliance measures for complying with the organisational competence obligation are:

• Include a regular agenda item in your compliance/management meetings to consider whether any changes to your business activities or Responsible Managers affects your organisational competency;
• Have a succession plan in place for Responsible Managers, especially those that have key expertise in particular financial products;
• Maintain and update a Responsible Manager register that shows their knowledge and skills and the financial services for which they are demonstrating organisational competency, and the ASIC option they were nominated under to support their appointment;
• Keep records showing that you have reviewed your organisational competence and the steps you have taken to maintain your organisational competence; and
• To ensure the Responsible Manager continues to be fit and proper, conduct periodic criminal history and bankruptcy checks.

Some of the ways we can help in relation to Responsible Managers are:

• Responsible Manager Service Agreement template for engaging external responsible managers. This is available via our eStore;
• Responsible Manager Masterclasses. We run these as public course throughout the year (the next one will be held in the second half of 2022) or we can be engaged to run a private in-house session;
• Responsible Manager assessments to advise whether they will satisfy ASIC’s requirements to support a licence application or variation; and
• Responsible Manager notifications of appointment.

For more information, please contact Sónia Cruz, Head of Licensing.

June 2022