ASIC overstepping in approving responsible managers

Although there is no legal requirement for regulators to approve responsible managers (RMs) of Australian Financial Services licensees (AFSLs), that’s what’s happening in practice, causing headaches for both the RMs and the licensees.

While a RM’s appointment triggered a requirement for the AFSL to notify the Australian Securities and Investments Commission (ASIC) within 20 days, no law required the Commission’s approval to give effect to that appointment.

The Fold Legal warned however, that in recent years the regulator had started stringently reviewing the capabilities of RMs, saying this was akin to “effectively reviewing whether licensees are complying with their organisational competence obligations in light of the experience of its RMs”.

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Solicitor director at the practice, Jaime Lumsden Kelly, said that this was “problematic for everyone involved”, especially as ASIC often took four to 12 months to process changes to RMs, putting licensees and RMs in a holding pattern.

“This new process has created uncertainty and both licensees and RMs are hesitant to fully commit to a role until ASIC has rubber-stamped the arrangement. Licensees are increasingly reluctant to employ RMs because they aren’t sure if they will have ongoing work for them,” she said.

“Similarly, potential RMs are reluctant to accept an employment offer from a licensee if they can’t be sure of job security.”

The lawyer suggested that training existing staff to become RMs and creating internal succession plans could help overcome these issues.




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