Regulatory Guide 105, or RG105, is a crucial document for financial services organisations. Regulated by the Australian Securities and Investments Commission (ASIC), this guide provides a detailed understanding of your organisational competence obligations and how you must demonstrate them. This includes nominating a “responsible manager” and ensuring they can demonstrate their knowledge.
Here’s everything you need to know about RG105 and what it means for your organisation.
What To Know About RG105
An Australian financial services licence (AFSL) comes with organisational competence obligations outlined in the Corporations Act 2001. This requires you to “be competent at the organisational level,” which means you must maintain the expertise required to provide the financial services covered by your licence by demonstrating the knowledge and skills of the people (Responsible Managers) who manage your business. Note that there’s a similar but separate obligation to ensure representatives are competent to provide financial services on your behalf.
AFS licence applicants should be prepared to demonstrate organisational competence at the time of application. However, this is an ongoing responsibility in maintaining your AFS licence competency at all times. To support the process, ASIC published RG105 — a regulatory guide focused on defining and demonstrating your expertise.
According to ASIC, RG105 establishes “minimum expectations for demonstrating organisational competence” to balance “certainty and flexibility.” This means that you can’t fall below the expectations set in RG105, but you can — and perhaps should — go above them.
Takeaways for Financial Organisations
This guide is one of many ASIC documents you can use to support compliance staff, processes and internal reviews. However, while it’s a good starting point, it can’t account for the exact nature, scale and complexity of your business. To meet all of ASIC’s requirements in RG105 and beyond, you’ll still need underlying compliance frameworks to structure your efforts.
RG105: The What and When of Compliance
If you want to meet each general obligation, you need to focus on two main elements:
How To Comply with RG105
RG105 provides a detailed understanding of what you need to do to comply. Remember, this depends on:
- Your business size.
- The financial services and products you provide.
- The roles of employees and representatives.
ASIC says the minimum requirement for organisational competence includes:
Nominating Responsible Managers
Responsible managers must be directly responsible for day-to-day decisions and the provision of financial services. They must have appropriate knowledge related to your offerings, whether separately or collectively. Each individual must also be able to demonstrate this knowledge appropriately.
Maintaining Competence
You’re also expected to maintain organisational competence over time. Keep in mind that this can change as your company grows.
ASIC expects you to:
- Regularly review your organisational competence.
- Review again after significant shifts in business activities, including new products, services and new or changed responsible managers.
- Keep records of your reviews.
Documenting Measures
According to ASIC, “It is more difficult to show compliance when documentation is not in place.” Therefore, you’re also expected to document compliance measures, including improvements or remediation, in some form.
When To Comply with RG105
ASIC expects ongoing compliance with RG105, but this is particularly relevant in three cases:
AFSL Application
AFS licence applicants must demonstrate organisational compliance from the time the licence is granted. ASIC can’t and won’t licence your organisation if it has “any reason to believe you are likely to not comply with this obligation.”
Day-to-Day Operations
Ongoing organisational compliance involves demonstrating your processes when necessary. ASIC may conduct surveillance visits to check on your efforts; if it has reason to believe you’re not compliant, it can take administrative action including licence suspension or cancellation and additional conditions.
Business Changes
According to ASIC, you must ensure you’ll be able to maintain organisational competence through any business changes before making them. This includes expanding your offerings or replacing a responsible manager.
RG105 Spotlight: Responsible Managers
Much of RG105 is dedicated to responsible managers — the experts who will represent and demonstrate your organisational competence. Here’s what to focus on:
Nomination
Although their titles and responsibilities may vary, the people you can nominate as responsible managers are generally those who have direct control over the day-to-day provision of your financial services. Just remember that they must have enough time to address both their existing duties and their role as a responsible manager.
The number of responsible managers necessary will depend on the nature, scale and complexity of your business. In some cases, ASIC may allow you to have just one — but in general, you’ll need multiple.
Knowledge
Responsible managers must have “appropriate knowledge and skills,” meaning expertise in providing the financial services and products covered by your licence. The underlying experience can come from previous work, but you’ll need to take extra steps to prove that it applies to your business. Keep in mind that no single responsible manager must have all the necessary knowledge; it’s measured collectively.
Expertise Demonstration
While overall knowledge is measured collectively, each individual responsible manager will need to demonstrate a certain level of expertise. When applying you have five options, each outlining one knowledge component and one skills component. See table below.:
You can review more details regarding these options in Section C of RG105.
How MIntegrity Can Support Organisational Competence
Because RG105 only sets minimum expectations for organisational competence, you’ll need to customise its guidance to fit your company’s offerings, size, scale, complexity and more. Fortunately, MIntegrity can help.
As experts in regulatory risk and compliance, we understand what it takes to establish competence in businesses of all shapes and sizes. Our experience in establishing, documenting and updating compliance frameworks positions us to recommend the steps you need to demonstrate competence throughout the life cycle of your licensed business, including by:
- Helping start ups with AFSL applications and Responsible Manager appointments;
- Removing or adding Responsible Managers to an existing license;
- Reviewing and uplifting your arrangements for demonstrating ongoing competence;
- Providing specific training to Responsible Managers and other staff to ensure competence is maintained over time.
We rely on best practices like utilising ongoing monitoring and supervision, optimised and customised technology solutions, regular reviews and consistent updates to ensure you’re not just meeting but exceeding ASIC’s expectations.
Ready to learn more about RG105, responsible managers and organisational competence? Contact us today!
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