AFSL Responsible Managers: ASIC Regulatory Guide 105 explained

What a Responsible Manager is

A financial services licensee operating under an Australian Financial Services Licence (AFSL) is required to appoint a sufficient number of Responsible Managers. This requirement stems from s 912A(1)(e) of the Corporations Act 2001, which mandates that licensees demonstrate organisational competence.

Responsible Managers are individuals whose skills and experience enable the licensee to demonstrate this competence. The specific skills and experience required will vary depending on the financial services the licensee is authorised to provide.

ASIC Regulatory Guide 105 (Licensing: Organisational competence) provides detailed guidance on the qualifications, experience, and ongoing management expectations for Responsible Managers.

Qualifications and experience

Responsible Managers (RMs) must demonstrate competence to ASIC, and Regulatory Guide 105 (RG 105) outlines five options for achieving this. These options allow RMs to combine relevant qualifications and experience to satisfy the requirements.

The most frequently used option for demonstrating competence requires a relevant industry-specific qualification alongside a minimum of three years of problem-free experience within the preceding five years. Alternative options exist, enabling substitution of equivalent qualifications or longer periods of experience.

Crucially, competence must be demonstrated for each individual financial service and product the RM oversees. This means a RM’s competence is not a general endorsement; it is specific to the products and services they are responsible for.

Numbers and replacement

A licensee must have a sufficient number of Responsible Managers (RMs) to adequately oversee the business. While the precise number depends on the licensee’s operations and scope of services, most nominate at least two RMs. This arrangement provides backup and ensures continuity of responsible management. Some sole-practitioner structures may be able to operate with a single RM, particularly where the financial-service scope is narrow. director duties self-check

The replacement of an RM is a regulated process. Licensees must notify ASIC within the prescribed statutory window when a change occurs. Failure to comply with this notification requirement can jeopardise the AFSL.

• Notification must occur within the statutory window.

It is crucial that licensees understand and adhere to these requirements to maintain compliance.

Ongoing competence

Responsible Managers must maintain ongoing competence. This expectation requires RMs to keep their knowledge current through continuing professional development.

Licensees have obligations to support this ongoing competence. They must have systems in place to ensure RMs remain involved in the day-to-day management of the financial-services business.

ASIC has taken enforcement action, including cancelling or suspending licences, when Responsible Manager arrangements have been found to be inadequate. These actions have occurred where RMs were not actively engaged in their responsibilities.