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Unlike many other professionals, Responsible Managers (RMs) appointed under an Australian Financial Services (AFS) Licensee are not required by ASIC to complete a minimum hours of professional training and development each year.
As anyone who’s applied for a new or varied Australian Financial Services Licence (AFSL) will know, ASIC requires detailed documentation to demonstrate the competency of each person appointed as a RM for the AFSL. This is to ensure that RMs satisfy the first leg of the competency requirements of s 912A(1)(e) of the Corporations Act 2001 (Cth) (the Corporations Act). Namely, that the licensee maintain its competence to provide the financial services covered by its AFSL.
ASIC sets out in Regulatory Guide 105 the minimum qualifications levels and the years of relevant work experience for each RM at the application stage. However, when it comes to the second leg of maintainingthe competency requirements in the Corporations Act, ASIC takes a far less rigorous approach. Essentially, ASIC allows licensees to self-regulate how they maintain the ongoing competence of their RMs. This self-regulatory approach is broadly described in RG 105 as:
- AFS Licensees should have measures in place to ensure they maintain their organisational competence at all times, including:
- reviewing their organisational competence on a regular basis and whenever their RMs or business activities change;
- maintaining and updating the knowledge and skills of their RMs; and
- keeping records to show the Licensee has reviewed its organisational competence and what steps have been taken to maintain its organisational competence; and
- AFS Licensees should document their measures in some form, as in ASIC’s view, it is more difficult to show compliance where documentation is not in place.
Importantly, ASIC requires no minimum number of hours of professional training and development each year, nor annual compliance certification or independent audit.
The only ASIC threat is a possible surveillance visit, but with an increasingly large number of AFSL holders, plus budget constraints, it’s little wonder that ASIC rarely scrutinises how licensees maintain the ongoing competence of their RM. This in turn easily leads to many AFSL holders taking a ‘don’t bother too much’ attitude towards this obligation. But, it’s not too hard to take a few practical steps each year to satisfy this requirement, as explained below.
As an AFS Licensee what action should I take?
Most RMs regularly read industry publications and attend industry meetings and seminars in order to keep abreast of developments with competitors, their industry and regulation.
So it’s not a big step, with the end of the financial year fast approaching, to:
- ask each RM to update their records of what they’ve done this last each year to maintain and update their knowledge and skills; and
- at your next Board Meeting, review and minute any changes in your business activities and what steps you’ve taken to maintain the organisational competence of your RMs.
If ASIC’s not fussed, why should we be?
Despite the only ASIC threat being a possible surveillance visit, it’s important to remember that what that visit might uncover may lead to other entities showing huge interest in whether an RM is ensuring that the AFS Licensee is maintaining its expertise through professional training. Namely: lawyers and litigation funders.
If the acts or omissions of a RM result in the AFS Licensee breaching its obligations under the Corporations Act (eg by providing inappropriate advice) pecuniary and criminal penalties may result. If the RM is a director or officer, they may be personally liable for breaches of the Corporations Act.
Furthermore, if those breaches cause loss to clients, litigation may be threatened and if the class of affected clients is large enough, a class action could result.
How can CompliSpace help?
CompliSpace provides a range of ongoing training services including high impact workshops designed for financial services executives and Responsible Managers. These practical group sessions are designed to keep attendees up-to-date with the latest industry changes, real life case studies and fast-track the practical development of new knowledge and skills.
Further details of our next sessions can be found here: /afsl-executive-workshop
CPD certificates and training material will be provided post workshop.
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