In the world of financial services, having the right Responsible Managers is crucial for maintaining compliance and operational success. But how do you identify the right individuals for this role, and more importantly, how do you set them up for success?

Let’s explore what a Responsible Manager does, who qualifies for the role, and the key compliance measures needed to meet ASIC’s standards.

What is a Responsible Manager?

Under an Australian Financial Services (AFS) licence, a business must maintain organisational competence, which is demonstrated by the expertise of those managing the financial services functions.

These individuals, known as Responsible Managers, help satisfy ASIC’s requirements to ensure that the licensee is competent during the application process and throughout the business’s operations.

The Role of a Responsible Manager

Responsible Managers oversee significant decisions regarding the provision of financial services in a business. Their role includes:

• Ensuring the quality of financial services provided
• Supervising and deciding how those services are delivered

Responsible Managers may hold different capacities within an AFS licensee, including:

• As an employee or authorised representative
• As a director
• As a contractor when the licensee lacks in-house organisational competence

Before accepting or continuing in the role of a Responsible Manager, consider the following:

• Do you have the time and capacity to fulfill the responsibilities?
• Does your job description clearly define your role as a Responsible Manager?
• Are you given the necessary authority and autonomy to carry out your duties?
• Does the licensee have effective compliance measures or show a commitment to improving them?

Who isn’t a Responsible Manager?

Senior executives such as CFOs, risk managers, or HR managers generally don’t qualify as Responsible Managers unless they are directly responsible for the provision of financial services.

However, this can vary depending on the size and structure of the business. In smaller firms, a Managing Director might take on this role, whereas, in larger organisations, it could be a middle manager overseeing key decisions.

Qualifications for a Responsible Manager?

To qualify as a Responsible Manager, individuals must meet one of five pathways set by ASIC, usually involving specific financial services experience. These pathways include:

1. Meeting an industry or APRA standard and having 3 years of relevant experience within the last 5 years
2. Being individually assessed as having diploma-equivalent knowledge and 5 years of experience within the last 8 years
3. Holding a relevant university degree, completing a short industry course, and having 3 years of experience within the last 5 years
4. Holding an industry-specific qualification equivalent to a diploma and 3 years of experience within the last 5 years
5. Demonstrating relevant experience over the past 10 years through a submission to ASIC if none of the above pathways apply

Additionally, Responsible Managers must be ‘fit and proper,’ demonstrated by providing ASIC with business references, a criminal history check, and completing ASIC’s personal information statement. ASIC will also conduct internal checks, including bankruptcy records.

What could raise concerns?

ASIC may question the suitability of a nominated Responsible Manager if they have:

• Had a licence suspended or cancelled
• Been banned or disqualified by a court
• Been disqualified from managing corporations
• Been banned from credit activity under State or Territory law
• Failed to give effect to an AFCA determination
• Been convicted of an offence in the past 10 years

Compliance: Maintaining organisational competence

When your business activities or Responsible Managers change, it’s vital to review your organisational competence to ensure you continue meeting your AFS licence obligations.

Some compliance strategies include:

• Regularly reviewing changes in your business or Responsible Managers during compliance meetings to assess their impact on your organisational competence.
• Implementing a succession plan for key Responsible Managers, particularly those with specialised knowledge in financial products.
• Keeping a detailed register of Responsible Managers, documenting their qualifications, experience, and the ASIC pathway under which they were appointed.
• Maintaining records of your efforts to review and update organisational competence.
• Periodically conducting criminal history and bankruptcy checks to ensure Responsible Managers remain fit and proper.

By staying on top of these essentials, you’ll ensure your Responsible Managers are well-positioned to keep your financial services business running smoothly and in compliance with ASIC’s standards.

If you need assistance navigating these requirements or have questions about your Responsible Managers, reach out to our team for guidance and support.

This article was written in collaboration with our allied corporate and commercial law firm, Hamilton Locke. Highly regarded for their energy and commercial approach, Hamilton Locke adds specialist expertise to our depth and breadth of experience at Source. Together with Hamilton Locke, we provide the most practical and effective professional services on the market.