Nominating the RM

In establishing and managing your AFSL, having the right support is crucial. The individuals nominated to the be RM of the licence will play a pivotal role in guiding the practice through the ebbs and flows of business.

A key obligation of an AFSL holder is to maintain the competence to provide the financial services covered by the licence, also known as the organisation competence obligation. This obligation is explained in ASIC Regulatory Guide 105, which provides that every AFSL must nominate Responsible Managers (RMs) who have appropriate skills and knowledge for financial services to be provided under the licence. RMs have the responsibility for significant day to day decision making for the AFSL. RMs must also meet fit and proper person requirements in order to undertake this role.

RG 105 – Demonstrating Knowledge and Skills

In selecting who to nominate as the RM and how many RMs should be nominated, the size and nature of the business should be taken into consideration. For example, the a licence providing financial product advice and dealing in financial products, the RM must demonstrate that they have experience and knowledge in these areas.

In accordance with RG105, RMs must meet one of the five options for demonstrating appropriate knowledge and skill and that combined, the nominated RMs have appropriate knowledge and skills to cover all of the AFSL’s financial services and product authorisations. You can read more about the five options here.

Fit and Proper Person Requirements

In addition to meeting one of the five options in RG105, RMs must demonstrate that they are a fit and proper person, which means that the person:

1. Is competent to undertake their role in relation to the financial services business;
2. Has the attributes of good character, diligence, honesty, integrity and judgement;
3. Is not disqualified from performing their role; and
4. Either has not conflict of interest in performing the role, or any conflict that exists will not create a material risk that the person will fail to properly perform their role.

It is important to note that the fit and proper person test is an ongoing obligation. The AFSL should have measures in place to demonstrate RMs’ ongoing compliance with this obligation. This is why we developed RM Bootcamp - so that RMs can stay up to date with their obligations in this role. 

Risks of Non Compliance

RMs have a key role in the ongoing operation of an AFSL. ASIC has previously taken enforcement action against RMs who have not adequately performed their duties with regard to failures to monitor and oversee the business and failed to ensure compliance with financial services laws. It is therefore crucial that AFSLs ensure that the individuals nominated for the RM role are fully compliant with ASIC’s requirements.

Click the following link to learn more about understanding your AFSL compliance obligations.