Compliance

Liability of a responsible manager

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The responsible manager (RM) of a licensee plays a key role under the financial services and credit licensing regimes.

However, many RMs are concerned as to their responsibilities and liabilities when things go wrong. This paper examines the role, responsibilities and ultimate liability of an RM.

Who is a responsible manager?

An RM is the person nominated within a business to demonstrate the licensee has the competence to provide the licensed financial services or credit activities.

The number of RMs required will vary with the size and complexity of the licensee's business-a small financial advisory practice might only need one RM, while a large bank might need dozens.

The role of the RM has been created by the Australian Securities and Investments Commission (ASIC) and is, therefore, not defined in legislation. Instead, the RM must fulfil the skill and knowledge requirements outlined by ASIC in Regulatory Guide 105 AFS licensing: Organisational competence (RG 105) for Australian financial services licensees (AFSLs) or Regulatory Guide 206 Competence and training for Australian credit licensees (ACLs).

These skills and knowledge requirements basically fall into two broad areas: product and regulatory.

Product knowledge is usually easiest to show-the senior operational line managers within the business would normally fill these RM roles as they will have the requisite experience together with the day-to-day oversight of business operations.

Regulatory knowledge is more difficult to show as it requires an RM who has experience operating within a regulated environment.

This means an understanding of the licensing, disclosure, conduct, reporting and regulatory capital requirements applicable to the business. An example of this type of RM would be a licensee's compliance manager.