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Responsible Managers play a crucial role in any financial services business. They are the people nominated by the licensee who are directly responsible for significant day-to-day decisions about the ongoing provision of your financial services.
However, unlike many professions which prescribe and regulate ongoing training requirements, RMs are left to ‘self regulate’ how they maintain their competence to provide financial services for which they are responsible and which are they are authorised to provide in accordance with the relevant AFSL.
Over the past 12 months we have observed an increased focus on RM competency, evidenced by performance, training records, and future training plans. This focus has been from a variety of sources, including:
The annual audit requirements under the Corporations Act largely focus on compliance with the financial requirements of the AFSL, however, the documents and information requested by auditors before signing off their FS71 audits has increased significantly over the last 12-18 months. This includes requests for evidence of RM training over the relevant audit period as well as a growing trend of more in-depth scrutiny of future training plans as part of this process.
- Third Party Investors
Fund managers who look to win Investment Mandates (IMs) or direct investments, particularly from registrable superannuation entities (RSE), will have noticed the increased due diligence that is undertaken prior to successfully securing the IM or investment.
Part of this increased due diligence is linked back to Australian Prudential Regulation Authority (APRA) expectations and requirements, where RSE licensees are expected to undertake initial and ongoing due diligence on the adequacy of the fund/investment managers operations, including the human resources in place.
Fundamentally, however, potential investors are often looking at providing the fund manager with a significant amount of their customers’ money. So, future training plans, and historical training registers, are standard requests now in order to demonstrate the competency of your RMs, particularly where the RM was appointed several years ago.
Whilst an ASIC surveillance visit is always a possibility, expect serious penalties, including the possibility of RM bans, where significant AFSL breaches occur as recently demonstrated (see The Sharemarket College and Macquarie Agricultural Funds Management ).
ASIC has made it clear in its second submission to the Financial System Inquiry (FSI) that it supported an extension of its enforcement powers to provide broader scope to hold RMs to account in circumstances where a RM had failed to take reasonable steps to ensure the licensee and its representatives comply with the law.
With the commissioning of a taskforce to review ASIC’s enforcement regime by the Minister for Finance and Revenue last year, the possibility of increased scrutiny of responsible managers is approaching closer on the regulatory horizon.
- AFSL Applications and Variations
It’s no surprise that, with the increased scrutiny of the financial sector by government and the wider community, this has had a flow on effect on AFSL applications and variations. In particular, any entity that attempts to appoint an external RM can expect ASIC to ask questions about the amount of time the RM will be working in the business, often including requests for the engagement letters/contracts. As part of this process ASIC will also want comfort around how any external RM will be monitored and trained, if appointed
How can CompliSpace help?
CompliSpace provides a range of ongoing training services including in-house and group workshop events.
Designed for financial services executives and Responsible Managers, these practical 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 group workshop sessions can be found here.
AFSL Executive Workshops
March 3, 2017 in Sydney and March 10, 2017 in Melbourne
These interactive, “on-the-go” workshops are designed to keep Responsible Managers, Compliance Managers and Financial Services Executives up to date with the latest industry changes, real-life case studies and exercises, and fast-track the practical development of new knowledge and skills as they relate to your Australian Financial Services licence obligations.
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