Responsible Managers (RMs), competency and culture - what’s the go?

Responsible Managers are how licensed financial services businesses demonstrate the competency to provide the financial services authorised by their AFSL.

So what does that mean?

1. Competency in the financial services (financial product advice, dealing, operating a registered scheme, etc). So, for example, for those licensees in the personal advice space, the RMs would need to be aware of the ramifications of the FOFA requirements to their licensee.
2. Competency in the financial products authorised under the AFSL. Of course, the competency in both the services and products can be demonstrated collectively by the RMs. That being so, RMs should be aware of those products for which they bring their experience, knowledge and expertise to the table and should be ensuring that such expertise is maintained and, ideally, enhanced over time.
3. Competency in the regulatory environment. RMs should have a working knowledge of:
4. 1. the fundamental obligations of an AFSL holder as listed in section 912A of the Corporations Act (we refer to these as the "AFSL's 10 commandments") and other key obligations such as breach reporting ("the un-Australian provision").
   2. the conditions on the AFSL which will vary slightly from licensee to licensee but may include a key person condition, compliance arrangements, training requirements, financial requirements, dispute resolution, record keeping plus others.
   3. regulatory developments as they impact their licensee.

The above represents what might be referred to as an RM's "dashboard".

And then there's culture. Why is this important for RMs and AFSL Holders?

1. The criminal law via the Commonwealth Criminal Code now recognises the role of culture in determining the mind of a corporate entity and whether it had the requisite intention to commit the crime.
2. Case law has considered the role of culture, particularly in relation to the imposition of penalties.
3. ASIC has frequently made adverse comments about an organisation's compliance culture. As early as 2006, ASIC observed that "ASIC expects directors and Responsible Officers (as they were called then) of financial services companies to play an active role in fostering a compliance culture in the industry"¹.

So, how do RMs drive an appropriate organisational and compliance culture within the financial services business? That's the next question!

Resources

1. Responsible Manager mindmap
2. T-REX (Tailored Regulatory EXchange)
3. Introductory Responsible Manager training course
4. Advanced Responsible Manager training course

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.