Staying on track as a responsible manager

With Sanlam Private Wealth (SPW) coming under ASIC pressure regarding the number of responsible managers (RMs) in its business, law firm Holley Nethercote explores what the role entails.

At the end of 2024, SPW, an affiliate of South African financial services firm Sanlam Group, provided an enforceable undertaking to ASIC after having been found to have breached its AFSL obligations. Among these was the obligation to hold a sufficient number of RMs within the business. 

“Sanlam had an inadequate number of responsible managers with suitable expertise to cover the diversity of the financial services offered by its CARs,” ASIC stated.

This is the second time in recent months that RM failings have resulted in ASIC action after Lanterne’s sole director, Peter Cozens, was found to lack the sufficient expertise to act as a responsible manager.

The role of responsible managers, according to ASIC’s RG 105, is to be directly responsible for significant day-to-day decisions about the ongoing provisions of financial services by the firm, and have appropriate knowledge, skills and experience for the services and products provided. They must also be able to demonstrate their own appropriate knowledge and skills.

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For the firm, they must be nominated at the time that the firm applies for their AFSL and be reviewed each time the business changes or when a RM departs. In a small advisory business, the directors are likely to be the main people who have direct responsibility for significant day-to-day business decisions.

As for how many RMs a firm must have, this should be a minimum of two but it depends on a variety of factors, such as:

• the financial services and products provided;
• the number of representatives who provide financial services on your behalf;
• the size, structure and diversity of operations;
• the number of investors;
• whether the main business is the provision of financial services; and
• any conflicts of interest that may arise as a result of other positions held by the responsible manager(s).

Regarding ASIC’s comments about the “suitable expertise” of Sanlam’s responsible managers, Sam Hills, partner at Holley Nethercote, highlighted the importance of training for RMs to ensure they are across the latest regulatory updates.

Training can include reading financial services law and regulatory updates, reading internal compliance or legal reports, sitting in on the compliance committee or attending specific training courses or webinars, and should be documented in a formal professional development plan.

She said: “RG 105 does not explicitly refer to the need for an RM to have knowledge and skills in relation to the Australian regulatory framework applicable to financial services. However, ASIC’s approach over the years reveals that this is regarded as an essential component of being an RM.  

“For example, at RG 105.93, when discussing requirements for RMs who have overseas experience and will be working in a financial advice business, ASIC requires them to complete a relevant short industry course ‘so that they can become familiar with Australian regulatory requirements (e.g. obligations under the Corporations Act)’.

“A range of activities will relate to the RM maintaining their skills and knowledge in relation to the technical aspects of the provision of the financial services for which they are responsible under the licence and the industry developments in relation to those financial services. For example, an RM of a financial planning licensee which provides personal advice to retail clients would need to stay abreast of developments in superannuation law and of market developments affecting investments.”