ASIC’s tougher approach to responsible managers causing problems

“In the past, ASIC would send a letter to licensees acknowledging that they had received their notification about RM changes and life went on. ASIC did not routinely assess whether an RM met the competence requirements of the law. Licensees assessed and maintained their own organisational competence,” Ms Lumsden Kelly explained.

“In recent years, this has changed. While an RM is still legally appointed from the date the licensee determines, whether they remain on the licence is increasingly subject to ASIC’s review and opinion.”

This means that before a licensee can be sure that an RM will remain on their licence long-term, she said, that person will be assessed by ASIC.

“They review a detailed history of that person’s experience to determine if they are competent to oversee the provision of financial services or credit activities. This means that ASIC is effectively reviewing whether licensees are complying with their organisational competence obligations in light of the experience of its RMs,” she cautioned.

Ms Lumsden Kelly said that the new process has created uncertainty because 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. Similarly, potential RMs are reluctant to accept an employment offer from a licensee if they can’t be sure of job security,” she said.

“The problem is exacerbated because it can take ASIC four to 12 months to process changes to RMs.

These delays, she said, make it difficult for licensees and potential RMs to maintain a holding pattern while ASIC completes its review.

“It also raises several questions. When should a licensee secure an RM? What if the RM gets a better offer? What happens to their licence if they lose an RM as they wait? Do they need to find a new RM and start the process all over again? What if that person can’t easily be replaced?” she said.

While she acknowledged that some licensees are forced to go to an external provider to source an RM, making this issue difficult to manage, training existing staff to fill these roles and creating internal succession plans are more viable solutions, she said.

“By having staff internally who can be tapped to fill the role on short notice, licensees can mitigate the uncertainty of needing to recruit new RMs externally,” she said.