The Devil is in the Detail: Responsible Managers and Culture of an AFS Licence Holder

Evidence provided to the Financial Services Royal Commission raises questions around whether financial services organisations are doing enough to comply with their obligations as AFS licensees, including the obligation to treat customers and investors fairly, honestly and efficiently. Complying with AFSL obligations is an essential part of the financial services industry. And Responsible Managers (RMs) are how licensed financial services businesses demonstrate their competency to provide the financial services authorised by their AFSL.

The Commission won't hand down its findings and recommendations for a while, yet the submissions and evidence seen to date serves as a timely reminder for financial services organisations to take a long hard look at their AFSL compliance framework, especially their Responsible Managers. Sometimes, the best place to start is by going back to the basics.

A Responsible Manager (RM) is a core part of the AFSL business, and is:

  • a nominated person within the business who has the skills and knowledge required by ASIC
  • looked at to assess organisational competency
  • of good fame and character
  • directly involved in significant day-to-day decisions that affect the AFSL business
  • directly involved in overseeing the provision of the authorised financial services, and
  • an active player in fostering compliance culture within the organisation.

Regulatory Guide 105 outlines the details for appointing a RM and maintaining the competency required to provide the financial services authorised by an AFSL.

In brief, competency for a RM focuses on:

  1. Competency in the financial services (financial product advice, dealing, operating a registered scheme, etc).
  2. Competency in the financial products authorised under the AFSL.
  3. Competency in the regulatory environment. RMs should have a working knowledge of:
    1. the general obligations of an AFS licensee (section 912A of the Corporations Act) and other key obligations such as breach reporting
    2. the conditions on the AFSL which will vary from licensee to licensee but may include, among others, compliance arrangements, training requirements, or financial requirements 
    3. regulatory developments as they impact their licensee and its business.

Key Challenges for RMs

Some key challenges for RMs include:

  • accountability
  • pecuniary penalties and liability
  • conflicts of interest, and
  • maintaining skills and knowledge.

ASIC remains heavily focused on culture and RMs are also expected to play an active role in fostering an appropriate organisational and compliance culture within their financial services organisation.

Demonstrating Competency to ASIC

ASIC's expectations of AFS Licensees include, at a minimum, that they regularly review their organisational competence to provide the financial services covered by its AFSL, and, maintain and update the knowledge and skills of their RMs. This means that AFS Licensees should be regularly reviewing their RMs key competency areas (financial services, financial products and regulatory environment), requiring RMs to refresh knowledge and skill up and ensure all such steps taken are documented and so demonstrable to ASIC. 

There is no doubt that the obligations for competency in risk management, conflicts of interest and compliance culture will be in ASIC's sights following the Financial Services Royal Commission. AFS Licensees taking a long hard look at their compliance framework are well advised to pay particular attention to their RMs in this area. 

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.

Staying up to date with your AFSL requirements and understanding ASIC’s key areas of focus for this financial year is crucial in our current financial services climate. Our Responsible Manager Workshop will assist you to ensure that your Responsible Managers and Representatives meet their ongoing training requirements, and will provide an interactive forum to develop skills and share the latest industry practice.

Further details of our next sessions can be found here:

CPD certificates and training material will be provided post workshop.

 We cover:

  • Financial services –your obligations in a “nutshell”
  • Compliance Culture: developing a compliance culture that works and adds real value
  • ASIC Case Study –The importance of Risk Management Systems
  • Conflicts of Interest -Current ASIC focus.
  • Responsible managers –roles & responsibilities
  • Key sector updates

If you are interested in looking at the details of demonstrating competency to ASIC, or are keen to see the latest developments in the financial services industry, give us a call. 

We are passionate about helping organisations to implement sustainable governance solutions.

Contact Details

P: 1300 132 090



Financial Services Updates

Financial Services Updates