In order to hold an Australian Financial Services licence, an organisation is required by ASIC to nominate a Responsible Officer. This is the person who is responsible for your organisational competence.
If you have been nominated by your company, or you are a sole operator, in which case you are the Responsible Officer, do you know your obligations under the Corporations Act 2001 and AFS licence conditions?
If not, here is a brief summary of what being a Responsible Officer entails. For more detailed information, it would be a good idea to undertake compliance training on this subject as part of a learning management system.
To qualify as a Responsible Officer, you need to:
- Be of good character (determined by police and bankruptcy checks, business references and a signed declaration)
- Perform regular duties associated with your organisation’s holding of an AFS licence
- Be able to satisfy one of the options relating to qualifications and experience in ASIC’s Regulation Guide 105.
Organisations need a Responsible Officer(s) in order to meet ASIC’s two main requirements for holders of AFS licences:
- That the licence holder has the necessary human resources to provide the financial services
- That the license holder has the competency to provide the financial services.
So what is a Responsible Officer required to do, apart from provide the means for an organisation to retain its license?
According to ASIC, a Responsible Officer must ensure that the quality of the services provided is adequate and that the organisation is meeting its obligations. The Responsible Officer is also required to maintain their knowledge and skills.
A good way to ensure the quality of services is being maintained is to observe whether staff and management are complying with operational and legislative requirements in their day-to-day activities.
A thorough understanding of your organisation’s AFS licence is the only way to know if your organisation is meeting its obligations and this is an area that would be covered if you (and your fellow Responsible Officers, if any) undertook some form of compliance training. Such training would also help satisfy the requirement that you maintain your skills and knowledge.
A Responsible Officer is further required to use due diligence in the execution of their duties, act in the organisation’s best interests at all times, avoid any conflicts of interest and never provide false or misleading information.
A concern many Responsible Officers share is the question of liability. If their organisation breaches the terms of its licence, will they be held personally accountable? In general terms, the answer is no. Ultimately the buck stops with the organisation.
You can, however, open yourself to criminal penalties and substantial fines if, while acting as a Responsible Officer, you commit an act that is illegal or in contravention of the Corporations Act. If you always act honestly, however, such a situation should never arise.
A good way to protect yourself is to always make decisions in good faith and in the best interests of the organisation. Be sure they are based on adequate information and that you have no personal interest in their outcome.
As the name implies, the position of Responsible Officer carries a lot of responsibility with it, so if you are nominated for this role, it would be in your own best interest to know exactly what those responsibilities are.