Licensees confused by ASIC approval of responsible managers

The Fold Legal solicitor Jaime Lumsden Kelly wrote in a blog that, in the past, ASIC did not routinely assess whether a responsible manager within an advice licensee met the competence requirements of the law, and that licensees assessed and maintained their own organisational competence.

However, according to Ms Kelly, this has changed in recent years.

“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,” she said.

“Before a licensee can be sure that an RM will remain on their licence long-term, 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.”

Ms Kelly said ASIC’s 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.

Further, licensees are increasingly reluctant to employ RMs, because they aren’t sure if they will have ongoing work for them and, similarly, potential RMs are reluctant to accept an employment offer from a licensee if they can’t be sure of job security.

“The problem is exacerbated because it can take ASIC four to 12 months to process changes to RMs. These delays make it difficult for licensees and potential RMs to maintain a 'holding pattern' while ASIC completes its review. It also raises several questions,” Ms Kelly said.

“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?”

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].