In the past year there have been several occasions where ASIC has acted against a Financial Services business or representative and within their media release specifically mentioned an area where a Responsible Manager failed their obligations. In this Technical Update we will be primarily focussing on what ASIC has indicated to be the role of a Responsible Manager and highlight some cases where ASIC has identified failing by Responsible Managers.
What is a Responsible Manager?
Responsible Managers are people that a licensee appoints to demonstrate to ASIC that they have the knowledge, skills and experience required to provide the financial services that ASIC has authorised on their Australian Financial Services Licence (AFSL). Regulatory Guide 105 indicates that responsible managers will have direct responsibility for significant day-to-day decisions about their respective financial services business and that they must be a fit and proper person who possesses the appropriate skills and knowledge for the financial products and services that their role is involved with.
ASIC Enforcement Actions
In the last six months of 2022, ASIC brought about enforcement action against four RM’s they believe have inadequately performed their duties. A summary of ASIC’s findings for each is below:
1. National Advice Solutions (22-366MR)
As we highlighted in the last update, ASIC found that National Advice Solutions failed to adequately monitor and supervise their authorised representatives and failed to maintain competence to provide the financial services stipulated in their licence. The two financial service providers reprimanded in this action (Ms Glasby and Mr Carcallas) were members of the Compliance Committee and were responsible managers for the licence.
ASIC stated that it expects responsible managers will assess strategies and policies used within the business to ensure that they are consistent with the obligations of the licence they represent.
2. Christen Walters (22-196MR)
In July 2022, ASIC banned Christen Walters from performing the functions of an officer and a responsible manager of a financial services business for four years. They found that he was not competent nor a fit and proper person to perform these roles.
Specifically, ASIC stated that Mr. Walters failed to monitor and oversee operational aspects of his business, including its bank accounts and client accounts, and failed to ensure the licence complied with financial services laws.
ASIC stated that it expects responsible managers to be actively involved in their licensee’s financial services business, including being directly responsible for significant day-to-day decisions.
3. Sirius Financial Markets (20-301MR)
In November 2022, ASIC banned Mark Bringans for eight years. Mr. Bringans was formally the responsible manager for Sirius Financial Markets Pty Ltd (Sirius Financial), an over-the-counter derivatives provider. Sirius Financial engaged an off-shore call centre to source clients to trade in high-risk contracts-for-difference and margin foreign exchange contracts. ASIC found that this call centre was engaging in pressure selling methods and providing personal advice on behalf of Sirius Financial when it was not licenced to do so.
In particular, ASIC found that Mr. Bringans was not adequately trained or competent, that he was not a fit and proper person to provide financial services, and that he had ignored his key duties as a responsible manager – to ensure that Sirius Financial operated within financial services laws. ASIC also determined that Mr. Bringans was disinterested and disengaged as a responsible manager, and that he did little other than attend Compliance Committee meetings.
- Responsible managers play a significant role in the operations of an AFSL, and it is crucial that Licensees adopt best practice procedures to ensure that RM’s are fully compliant with ASIC’s requirements.
- It is important that RM’s maintain the requisite knowledge and skills through continued professional development and industry engagement.
- Responsible managers must ensure they are aware of the operational practices within the business they represent, that they are monitoring business operations, and that they are responsive when they see practices that need to be addressed.
For More Information
Other things to Note:
1. Quality of Advice Review
On 8th February, The Treasury released the Quality of Advice Review – Final Report. Within this report were 22 recommendations across 13 topic areas:
|1. Personal Advice
|2. General Advice
|3. Relevant Providers
|4. Good Advice Duty
|5. Statutory Best Interest Duty
|6. Superannuation Advice
|7. Deduction of adviser fees from superannuation
|8. Ongoing fee arrangements and consent arrangements
|9. Statement of Advice
|10. Financial Services Guide
|11. Consent requirements for wholesale clients
|12. Design and Distribution obligations
|13. Conflicted Remuneration
We have read these recommendations and will continue to monitor the outcome of this report. At this stage, these recommendations have not been endorsed or supported by the government so there are no changes yet required as a result of Treasury’s report.
ASIC’s Indigenous Financial Services Framework
On 14th February, ASIC published its Indigenous Financial Services Framework as part of their commitment to support positive financial outcomes for First Nations people. Following extensive consultation with First Nations peoples, industry representatives, and government bodies ASIC identified four key learnings:
- First Nations peoples had unique, established economies before colonisation that continued today and should be understood, respected, and maintained
- First Nations peoples have been prohibited and excluded from participating in the Australian financial system
- Financial wellbeing affects all aspects of First Nations peoples’ lives, and
- First Nations peoples have many different versions of financial success that need to be accepted and empowered.
The Framework supports ASIC’s intent to set out several long-term outcomes that include:
- reducing the impact of harms and misconduct on individuals and communities
- providing accessible and appropriate financial products and services
- increasing holistic service provision and delivery, and
- establishing positive and culturally appropriate experiences when engaging with the financial services industry and other service providers.
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GRC Essentials can help
If you require any assistance, we can offer training for your personnel or a review of your compliance documents. Please don’t hesitate to contact us if you have any questions or if we can help you with any of your compliance matters.
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