ASIC RG 105 — ASIC Regulatory Guide – RG 105 AFS licensing: Organisational competence

Page 1 REGULATORY GUIDE 105 AFS licensing: Organisational competence June 2022 About this guide This guide is for Australian financial services (AFS) licensees and AFS licence applicants. It describes what we look for when we assess compliance with the ‘organisational competence obligation’, which is one of the general obligations under s912A(1) of the Corporations Act. Page 2 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in June 2022 and is based on legislation and regulations as at the date of issue. In June 2025, we updated references to reflect changes to RG 1 and related guidance. Previous versions:  Superseded Regulatory Guide 105 AFS licensing: Organisational competence, issued April 2020  Superseded Regulatory Guide 105 Licensing: Organisational competence, issued October 2007, reissued December 2016 This guide replaced Section E of Regulatory Guide 164 Licensing: Organisational capacities (RG 164), issued November 2001, updated November 2002, withdrawn October 2007; parts of Regulatory Guide 130 Managed investments: Licensing, issued August 1998, updated November 1998, June 1999 and October 1999, withdrawn October 2007; and Responsible officers: Demonstrating compliance with organisational competency obligations—An ASIC guide, issued July 2003, withdrawn June 2007. Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 3 Contents A Overview .................................................................................................4 Who this guide is for ................................................................................4 What this guide is about ..........................................................................4 The organisational competence obligation ..............................................5 What you need to do to comply ...............................................................5 When you need to comply .......................................................................6 When you need to tell us about your responsible managers ..................7 Our approach to setting minimum expectations ......................................7 B Nominating your responsible managers .............................................8 Who you can nominate as a responsible manager .................................8 Covering all of your financial services and products .............................12 The number of responsible managers that you need ............................14 C The five options for demonstrating knowledge and skills ..............16 Overview of the five options...................................................................16 ‘Relevant’ qualifications/training and experience ..................................17 The kind of qualifications/training and experience that we accept ........17 Option 1: Relevant industry or APRA standard .....................................17 Option 2: Individual assessment ............................................................18 Option 3: University degree and short industry course .........................18 Option 4: Industry-specific or product-specific diploma (or higher) .......19 Option 5: Other demonstration of knowledge and skills ........................21 Explanations ..........................................................................................25 D Telling us about your responsible managers ...................................28 Applying for an AFS licence or varying your licence authorisations ......28 Changing your responsible managers ...................................................31 Key terms .....................................................................................................32 Related information .....................................................................................36 Page 4 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 4 A Overview Key points Australian financial services (AFS) licensees must comply with the organisational competence obligation in s912A(1)(e) of the Corporations Act 2001 (Corporations Act), and AFS licence applicants must be able to demonstrate in their licence application that they can comply with this obligation: see RG 105.4 and RG 105.12–RG 105.13. We assess your compliance with this obligation by looking at the knowledge and skills of your ‘responsible managers’: see RG 105.5 and RG 105.17– RG 105.18. What you need to do to comply will depend on the nature, scale and complexity of your business. However, this guide sets out our minimum expectations for demonstrating organisational competence: see RG 105.6– RG 105.11. Who this guide is for RG 105.1 This guide is for: (a) AFS licensees; and (b) applicants for an AFS licence or a variation of their licence. What this guide is about RG 105.2 This guide describes what we look for when we assess compliance with the ‘organisational competence obligation’, which is one of the general obligations under s912A(1) of the Corporations Act. RG 105.3 This guide does not cover the obligation to ensure that your representatives are trained and competent to provide the financial services covered by your AFS licence: see s912A(1)(f). To find out about that obligation, see Section E of Regulatory Guide 104 AFS licensing: Meeting the general obligations (RG 104). If your representatives provide financial product advice to retail clients, see also Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146). Note 1: Sections D and E of RG 146 are currently under review. Note 2: As a result of the financial adviser professional standards reforms, the training standards in RG 146 no longer apply to relevant providers who provide personal advice to retail clients on relevant financial products. See our website for more information on how the reforms affect you. Page 5 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 5 The organisational competence obligation RG 105.4 If you are an AFS licensee, you must maintain the competence to provide the financial services covered by your AFS licence: see s912A(1)(e) of the Corporations Act. We refer to this obligation as the ‘organisational competence obligation’. This is because this obligation requires you to be competent at the organisational level. Note 1: This is not the same as the obligation under s912A(1)(f) to ensure that the representatives who provide financial services on your behalf are trained and competent to do so: see RG 105.3. Note 2: In this guide, references to sections (s) are to the Corporations Act, unless otherwise specified. You can find a copy of the Corporations Act on the Federal Register of Legislation. RG 105.5 We assess your compliance with this obligation by looking at the knowledge and skills of the people who manage your financial services business. We refer to these people as your ‘responsible managers’. What you need to do to comply RG 105.6 The Corporations Act places responsibility on you to ensure that you maintain the competence to provide the financial services covered by your AFS licence. RG 105.7 What you need to do to comply will depend on the nature, scale and complexity of your business, including the size of your business, the financial services and products you provide, and the roles that individuals play in your business. However, this guide sets out our minimum expectations for demonstrating organisational competence. RG 105.8 At a minimum, you need to nominate responsible managers who: (a) are directly responsible for significant day-to-day decisions about the ongoing provision of your financial services (see Section B); (b) together, have appropriate knowledge and skills for all of your financial services and products (see Section B); and (c) individually, meet one of the five options for demonstrating appropriate knowledge and skills (see Section C). RG 105.9 You also need to have measures in place to ensure that you maintain your organisational competence at all times: see condition 4 of the standard AFS licence conditions in Pro Forma 209 Australian financial services licence conditions (PF 209). Page 6 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 6 Measures for maintaining organisational competence RG 105.10 We expect your measures for complying with the organisational competence obligation will ensure that you: (a) review your organisational competence on a regular basis and whenever your responsible managers or business activities change; (b) maintain and update the knowledge and skills of your responsible managers; and (c) keep records showing that you have reviewed your organisational competence and the steps you have taken to maintain your organisational competence. Note: For more information on compliance measures, see Sections B and C of RG 104. RG 105.11 We expect you to document your measures in some form. In our view, it is more difficult to show compliance when documentation is not in place. Documentation helps you demonstrate whether or not you are complying with the organisational competence obligation. When you need to comply Applying for an AFS licence RG 105.12 If you are applying for an AFS licence, you must be able to show that you can comply with the organisational competence obligation from the time you are granted a licence, and on an ongoing basis. We cannot grant you a licence if we have any reason to believe you are likely to not comply with this obligation: see s913B(1)(b). Note: If you are applying for an AFS licence, you should read Regulatory Guide 1 Applying for and varying an AFS licence (RG 1) and the AFS Licensing Kit. These explain the AFS licence application process and the ‘proof’ documents you may need to provide to support your application. Ongoing compliance RG 105.13 After you have an AFS licence, you must maintain your organisational competence at all times. If we have reason to believe that you are not complying, we may take administrative action, which could include suspending or cancelling your licence, or imposing additional licence conditions: see s915C(1)(a) and 914A(1). Note: For guidance on our administrative powers, see Regulatory Guide 98 ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders (RG 98). RG 105.14 If we conduct a surveillance visit on your business, we may check your ongoing compliance with the organisational competence obligation, including the measures you have for ensuring compliance. Page 7 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 7 RG 105.15 If you breach or are likely to breach the organisational competence obligation, you may need to notify us of that breach: see s912DAA. Note: For guidance on notifying ASIC of reportable situations, see Regulatory Guide 78 Breach reporting by AFS licensees and credit licensees (RG 78). Making changes to your business RG 105.16 We expect you to review your organisational competence and ensure that you will maintain it before you make any changes to your business, such as expanding your range of financial services or products, or replacing a responsible manager. When you need to tell us about your responsible managers RG 105.17 You must nominate your responsible managers when you apply for an AFS licence or apply to vary your licence authorisations. You must also notify us if you change any of your responsible managers. This is explained in Section D. RG 105.18 We may ask you about your responsible managers if we conduct a surveillance visit on your business. Our approach to setting minimum expectations RG 105.19 In setting out minimum expectations for demonstrating organisational competence, we aim to strike a balance between certainty and flexibility for AFS licensees, while promoting consumer protection and market integrity. RG 105.20 This guide focuses on the people in your business who are responsible for the quality of your financial services. In setting minimum expectations, we aim to ensure that you have enough of these people with appropriate knowledge and skills so that you have the competence to provide all of your financial services efficiently, honestly and fairly. RG 105.21 What we consider to be appropriate knowledge is strongly influenced by the Australian Qualifications Framework and recognises that short industry courses, industry standards and the Australian Prudential Regulation Authority (APRA) also have a role to play in setting benchmarks for organisational competence. Page 8 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 8 B Nominating your responsible managers Key points You can nominate someone as a responsible manager if they: • are directly responsible for significant day-to-day decisions about the ongoing provision of your financial services (see RG 105.22–RG 105.27) or, for some small-scale, heavily automated businesses, provide sign-off on the financial services provided (see RG 105.28–RG 105.35); • meet one of the five options for demonstrating knowledge and skills in Section C (see RG 105.36); and • are ‘fit and proper’ (see RG 105.38). You also need to ensure that you nominate responsible managers whose combined knowledge and skills cover all of your financial services and products: see RG 105.39–RG 105.48. The number of people you need to nominate as responsible managers will depend on the nature, scale and complexity of your business: see RG 105.49–RG 105.53. Who you can nominate as a responsible manager Direct responsibility for significant day-to-day decisions RG 105.22 The people you nominate as responsible managers must have direct responsibility for significant day-to-day decisions about your financial services. The only exception is for some responsible managers of small-scale, heavily automated businesses: see RG 105.28–RG 105.35. RG 105.23 Who you nominate as your responsible managers will depend on the nature, scale and complexity of your business: see RG 105.53. In most cases, the people who have direct responsibility for significant day-to-day decisions about your financial services will be people who decide how your financial services are provided and supervise the provision of those services. A compliance manager or financial controller, for example, might not have the level of direct responsibility required. Your responsible managers do not need to actually provide financial services on your behalf, although they might do so. RG 105.24 The job description and title of responsible managers will vary from business to business. For example, in a small advisory business, the directors are likely to be the main people who have direct responsibility for significant day-to-day business decisions but, in a larger financial services group, anyone ranging from the chief executive officer down to middle management might have the required direct responsibility. Page 9 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 9 RG 105.25 For AFS licensees that are regulated by APRA, the people with direct responsibility would usually include those who are ‘responsible persons’ for the purposes of APRA’s ‘fit and proper’ standard. If you are a body corporate, the people you nominate do not need to be ‘officers’ of the body corporate as defined in s9. Similarly, the people you nominate as responsible managers do not have to be the same as your ‘fit and proper people’. Note: Your ‘fit and proper people’ are the people who are required to be ‘fit and proper persons’ under s913BA: see RG 1 and the AFS Licensing Kit for more information. Level of involvement for responsible managers generally RG 105.26 Responsible managers who have direct responsibility for significant day-to- day decisions about your financial services must have enough time available to fulfil their responsibilities. Before you nominate a person as a responsible manager, you need to consider their overall business commitments, including whether they are already acting as a responsible manager for other AFS licensees or hold other business roles. If they do, you should consider whether they have enough time available to act as a responsible manager for you. RG 105.27 In general, the more commitments a responsible manager has, the less likely they will be to have enough time available to act as your responsible manager. Examples of factors that may affect how much time a responsible manager has available include: (a) whether they are a key person or responsible manager for any other AFS licensees; (b) how many staff they need to supervise and whether those staff are in different locations; (c) whether the other licensees share common systems or processes with you (e.g. they are in the same corporate group); (d) the nature, scale and complexity of the business of the other licensees— for example, the size of their business and how many managed investment schemes (registered schemes) and/or corporate collective investment vehicles (CCIVs) they operate; and (e) any other roles (both current and proposed) performed by the responsible manager, including engagement as a lawyer, accountant, or other professional adviser or consultant, and any directorships or other employment. Level of involvement for responsible managers of small-scale, heavily automated businesses providing limited financial services RG 105.28 We recognise that responsibility for decisions about the financial services provided may not require significant day-to-day involvement from responsible managers of all AFS licensees with heavily automated business models and a Page 10 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 10 small client base—referred to in this guide as ‘small-scale, heavily automated businesses’. In this context, we consider that: (a) ‘heavily automated’ means the business relies on algorithms or other technology to deliver financial services in a consistent way following the input of required client information (i.e. there is extremely limited human discretion exercised by the AFS licensee or its representatives in providing the financial services on a day-to-day basis); and (b) a licensee is small-scale if it has provided financial services to fewer than 1,000 retail clients. RG 105.29 An AFS licence applicant with a small-scale, heavily automated business may nominate a responsible manager who will provide regular sign-off on the licensee’s processes and systems, and the quality of the financial services provided. Such a responsible manager does not need to have day-to-day involvement in the business, but must be available as needed. RG 105.30 This reduced level of involvement is available when: (a) the responsible manager meets one of the five options for demonstrating knowledge and skills (see RG 105.36); (b) the responsible manager is nominated as a key person on the AFS licence (see RG 105.112); (c) the prospective licensee has a service agreement with the responsible manager (key person), under which: (i) the responsible manager is responsible for decisions about the processes and systems that are subject to their sign-off, and for the quality of financial services generated through those systems; and (ii) the responsible manager’s review and sign-off must be completed at the time of the licence application, at regular specified intervals and in other circumstances as appropriate (see RG 105.31–RG 105.34); (d) the licensee only provides limited financial services (see RG 105.35); and (e) a nominated director is named on the licence who has day-to-day involvement in the business and is responsible for ensuring that the responsible manager is consulted with and engaged, as needed, in relation to the financial services provided. Sign-off requirements RG 105.31 A responsible manager who is nominated as the key person, and who does not have day-to-day involvement in the business’s financial services, must sign off on its processes and systems (and the services that are provided as a result): (a) at the time you apply for your AFS licence; Page 11 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 11 (b) at regular specified intervals—every six months for the first year of operation, and every 12 months after that; and (c) in other circumstances as appropriate. RG 105.32 Situations when we expect that the responsible manager (key person) will provide sign-off at the appropriate times include when there are material changes to the financial services provided through the automated processes and systems (e.g. changes to the business model, adjustments to the assumptions underpinning an algorithm, or legislative reform), and when the financial services provided are not delivering the outcomes intended. Note: If you are required to make changes to your financial services as a result of the sign-off process, you must also consider whether you have an obligation to notify ASIC of a reportable situation: see RG 78. RG 105.33 As the AFS licensee, we expect that you will: (a) monitor the financial services you provide, including the reports, recommendations or services that are produced by the algorithms and technology; and (b) establish processes to ensure that the responsible manager (key person) is involved as needed. RG 105.34 A failure to involve the responsible manager (key person), as needed, or to maintain the appropriate processes, may indicate that you are not meeting your organisational competence obligation. Similarly, a failure by the responsible manager to provide sign-off at the appropriate times will mean that you are not complying with your obligations as an AFS licensee. Financial services that may be provided RG 105.35 As stated in RG 105.30(d), we will allow a responsible manager to have a reduced level of involvement in a small-scale, heavily automated business when the AFS licensee provides limited financial services. By ‘limited financial services’, we mean financial product advice and dealing in (other than issuing): (a) liquid financial products (listed and quoted Australian securities and simple managed investment schemes); Note: A simple managed investment scheme is a registered scheme that invests at least 80% of its assets in a bank account where funds can be withdrawn within three months, or in arrangements where the investments can be realised at market value within 10 days: see reg 1.0.02 of the Corporations Regulations 2001 (Corporations Regulations). (b) non-cash payment facilities; and (c) financial products issued by a prudentially regulated business (e.g. deposit products, superannuation products and insurance contracts). Note: For guidance on these financial services, see Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36). Page 12 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 12 Knowledge and skills RG 105.36 The people you nominate as responsible managers also need appropriate knowledge and skills for the financial services and products their role relates to. You need to be able to demonstrate that: (a) each responsible manager you nominate meets one of the five options for demonstrating appropriate knowledge and skills—the five options are explained in Section C; and (b) together, the responsible managers you nominate have appropriate knowledge and skills to cover all of your financial services and products—this is explained in RG 105.39–RG 105.48. RG 105.37 If you nominate someone as a responsible manager but they do not meet one of the five options for demonstrating appropriate knowledge and skills, you cannot rely on this person to demonstrate that you meet the organisational competence obligation. If the person later acquires the knowledge and skills to meet one of the five options (e.g. by gaining enough relevant experience), you may then rely on them for organisational competence purposes. Fit and proper RG 105.38 When nominating your responsible managers, you also need to ensure that they are ‘fit and proper’: see Section C of RG 1. It is important to note that these responsible managers do not need to be one of the people in s913BA who are required to be ‘fit and proper persons’. Note: We refer to the people who are required to be fit and proper persons as your ‘fit and proper people’. For more information on our requirements relating to fit and proper people, see RG 1. Covering all of your financial services and products What are appropriate knowledge and skills? RG 105.39 Together, your responsible managers need to have knowledge and skills that demonstrate you can provide all of the financial services and products covered by your AFS licence, while complying with the conditions of your licence and any other relevant statutory obligations. RG 105.40 This experience may have been obtained in relation to activities associated with a different licence authorisation. If this is the case, you will need to demonstrate that this experience constitutes appropriate knowledge and skills for the authorisations you are applying for. RG 105.41 If you operate a registered scheme, unregistered scheme (including an investor directed portfolio service (IDPS), or managed discretionary account (MDA) service) or CCIV, your responsible managers must demonstrate that they Page 13 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 13 understand the investment and operational issues of the assets under management or, if relevant, the business proposed to be operated under your AFS licence. How do you ‘cover’ all of your financial services and products? RG 105.42 If you have a responsible manager with appropriate knowledge and skills for some, but not all, of your financial services or products, you need to ensure that your other responsible managers have appropriate knowledge and skills for the remaining services and products. RG 105.43 For example, if you deal in life and general insurance products, you could have one responsible manager with knowledge and skills in relation to advising and dealing in life insurance products and another with knowledge and skills in advising and dealing in general insurance products. Alternatively, one responsible manager could have knowledge and skills in relation to advising on both types of insurance products, while the other responsible manager has knowledge and skills for dealing in both types of insurance products. In both examples, each responsible manager would need to meet one of the five options in Section C for the services and products their role relates to. Operating a managed investment scheme or CCIV RG 105.44 If you operate a registered scheme, unregistered scheme (including an IDPS or MDA service) or CCIV, you also need to have at least one responsible manager with knowledge and skills for the kinds of assets under management or the business operated by the scheme or CCIV: see RG 105.75. For example, if you operate a registered scheme or a CCIV that invests in financial assets (e.g. cash or shares), you need to have: (a) a responsible manager with knowledge and skills for the operation of a registered scheme or for operating the business and conducting the affairs of a CCIV (i.e. the financial service you provide); and (b) the same or a different responsible manager with knowledge and skills in relation to investment in financial assets (i.e. the asset under management). RG 105.45 In assessing whether a responsible manager meets the knowledge and skills component of Options 1 to 5 in Table 1, we will consider the following as relevant: (a) for the financial service of operating the business and conducting the affairs of: (i) a retail CCIV—qualifications and prior experience in operating a registered scheme or retail CCIV (or similar overseas experience); Page 14 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 14 (ii) a wholesale CCIV—qualifications and prior experience in operating a registered scheme or unregistered scheme, or a retail or wholesale CCIV (or similar overseas experience); (b) for the assets under management—qualifications and prior experience in relation to investment in the CCIV asset type(s). Advising on, and dealing in, CCIV securities RG 105.46 When assessing a responsible manager’s competence to provide financial product advice on and/or deal in CCIV securities, each responsible manager must meet one of the five options in Table 1. RG 105.47 Further, when assessing whether a responsible manager meets the knowledge and skills component of Options 1 to 5 in Table 1, we will consider the following as relevant: (a) qualifications and prior experience in providing financial product advice on and/or dealing in securities or CCIVs; (b) qualifications and prior experience in providing financial product advice on and/or dealing in interests in a managed investment scheme; and/or (c) similar overseas experience. Licensed custodial service providers RG 105.48 To be authorised as a licensed custodial service provider, you must have responsible manager(s) who have knowledge and skills in custodial services (i.e. the financial service) and in holding the kind of assets that you are seeking authorisation to hold under your AFS licence. The number of responsible managers that you need RG 105.49 The number of people you need to nominate as responsible managers will depend on the nature, scale and complexity of your business: see RG 105.53. However, we expect that you will nominate at least two responsible managers. RG 105.50 If you operate a large business, you will usually only need to nominate a subset of the people who can be responsible managers. If you are a smaller business, you may need to nominate everyone who can be a responsible manager. If you are an individual who holds or is applying for an AFS licence in your own name, you will need to nominate yourself as the responsible manager. Note: The maximum number of responsible managers you can have nominated at any given time is 20. RG 105.51 In some cases, we may accept you having only one responsible manager—for example, when you operate a one-person advisory business or when your main business is not the provision of financial services. Page 15 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 15 ‘Key person’ licence conditions RG 105.52 If you are heavily dependent on the competence of one or two responsible managers (e.g. in a small organisation with one or two principals), we will generally impose a ‘key person’ condition on your AFS licence: see RG 105.112. Nature, scale and complexity of your business RG 105.53 Factors that can affect who you nominate as your responsible managers, and how many you need, include: (a) the financial services and products you provide; (b) the number of representatives who provide financial services on your behalf; (c) the size, structure and diversity of your operations; (d) the number of investors you have; (e) whether your main business is the provision of financial services; and (f) any conflicts of interest that may arise as a result of other positions held by the responsible manager(s). Page 16 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 16 C The five options for demonstrating knowledge and skills Key points You need to be able to demonstrate that each responsible manager meets one of the five options in Table 1: see RG 105.54. The five options are different combinations of training, qualifications and experience for demonstrating that responsible managers have knowledge and skills appropriate to their role: see RG 105.55–RG 105.93. Overview of the five options RG 105.54 You need to be able to demonstrate that each of your responsible managers has appropriate knowledge and skills for their role in your business. There are five options for demonstrating this: see Table 1. Each option has a knowledge component (generally requiring completion of relevant qualifications or relevant courses) and a skills component (generally requiring minimum years of relevant experience). Your responsible managers must meet both components of an option. Table 1: The five options for demonstrating knowledge and skills of responsible managers Option Knowledge component (e.g. qualifications, training) Skills component (i.e. experience) Option 1 (see RG 105.60–RG 105.62) Meet widely adopted and relevant industry standard or relevant standard set by APRA Three years relevant experience over the past five years Option 2 (see RG 105.63–RG 105.65) Be individually assessed by an authorised assessor as having relevant knowledge equivalent to a diploma Five years relevant experience over the past eight years Option 3 (see RG 105.66–RG 105.70) Hold a university degree in a relevant discipline and complete a relevant short industry course Three years relevant experience over the past five years Option 4 (see RG 105.71–RG 105.77) Hold a relevant industry-specific or product- specific qualification equivalent to a diploma (or higher) Three years relevant experience over the past five years Option 5 (see RG 105.78–RG 105.81 and Example 1–Example 7) If not relying on Options 1 to 4, you need to provide a written submission that satisfies us that your responsible manager has appropriate knowledge and skills for their role. Your submission must cover all of the information in RG 105.78. Some example situations where ASIC may, or may not, accept a responsible manager under Option 5 are outlined at RG 105.81. Thi s cell is bla nk Page 17 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 17 ‘Relevant’ qualifications/training and experience RG 105.55 Your responsible managers need to have experience and qualifications or training that are relevant to their role in your business. This means that their experience and qualifications or training need to be relevant to one or both of the following: (a) the financial services and products that their role relates to; and/or (b) if you operate a registered scheme, unregistered scheme (including an IDPS or MDA service) or CCIV, or provide a custodial service—the assets under management or held, or business that their role relates to (see RG 105.44 for an example). The kind of qualifications/training and experience that we accept RG 105.56 RG 105.60–RG 105.77 give guidance on the qualifications and training we will accept under Options 1 to 4. RG 105.57 Options 1 to 4 also require minimum periods of relevant experience. We expect this to be practical experience that enables a responsible manager to understand the responsibilities and requirements of their role in your business. This generally includes experience in: (a) deciding how the financial services or products their role relates to are provided; and (b) either actually providing those financial services or products or supervising others who do. RG 105.58 Option 5 is a flexible option that does not set minimum qualifications, training or periods of relevant experience: see RG 105.78–RG 105.81. RG 105.59 We will accept relevant overseas qualifications if they are comparable to Australian qualifications that meet one of the five options: see RG 105.87– RG 105.93. Option 1: Relevant industry or APRA standard RG 105.60 We will accept a wide range of relevant standards for the knowledge component of Option 1. The onus is on you to demonstrate the relevance of a standard to your responsible manager’s role. Your responsible manager must also have three years relevant experience over the past five years. Page 18 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 18 Industry standards RG 105.61 As well as being relevant, industry standards must also be widely adopted. To be widely adopted, industry standards generally need to: (a) be endorsed by the appropriate industry body or bodies; (b) have been developed with industry; (c) address the competencies required for that sector, financial service or product; and (d) represent the views of a significant number of industry participants. APRA standards RG 105.62 We will accept a standard set by APRA if you are a body regulated by APRA and the standard is relevant to your responsible manager’s role. For example, if you are a general insurer regulated by APRA, we will accept that a person who is a ‘responsible person’ for the purposes of APRA’s Prudential Standard CPS 520 Fit and proper has appropriate knowledge about dealing in general insurance products. Option 2: Individual assessment RG 105.63 Individual assessment means an assessment of a person’s capability to undertake their current duties, taking into account their previous work experience. This type of assessment does not necessarily include a formal written examination. It may take the form of an oral or practical test, on-the- job assessment or some other form. RG 105.64 Individual assessment must be carried out by an authorised assessor. The assessor must verify that your responsible manager has knowledge relevant to their role and equivalent to a diploma. Note: You can get an indication of authorised assessors that carry out individual assessments by looking at the ASIC Training Register. The register content is valid up to 24 September 2012: see RG 105.84. RG 105.65 Individual assessment is generally more suited to experienced responsible managers who do not have formal qualifications. This is why Option 2 requires a longer period of relevant experience (i.e. five years relevant experience over the past eight years). Option 3: University degree and short industry course RG 105.66 Under Option 3, we will accept a responsible manager with a university degree that is only broadly relevant to their role if they have also completed a Page 19 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 19 short industry course covering the specific knowledge not covered by their degree. Your responsible manager must also have three years relevant experience over the past five years. University degree RG 105.67 To rely on Option 3, your responsible manager’s degree must be in a relevant discipline. We generally prefer this to be a financial discipline (e.g. economics, commerce, business, accounting or equivalent). In some cases, we may accept a degree in some other technical discipline (e.g. a degree in geology if your responsible manager’s role relates to giving financial product advice about shares in a company in the mining and resources sector). RG 105.68 If your responsible manager has a university degree that is specifically relevant to the industry or product their role relates to, you will generally be able to rely on Option 4 instead. Short industry course RG 105.69 To rely on Option 3, your responsible manager’s short industry course must be specifically relevant to the industry or product their role relates to. RG 105.70 We will accept relevant short industry courses that are: (a) listed on the ASIC Training Register (see RG 105.84); or (b) approved under the Australian Qualifications Framework or self- accredited by universities or other institutions of higher education (see RG 105.82–RG 105.83). Option 4: Industry-specific or product-specific diploma (or higher) RG 105.71 To rely on Option 4, your responsible manager must have a qualification that is specifically relevant to the industry or product their role relates to. The qualification must be equivalent to a diploma or higher. They must also have three years relevant experience over the past five years. RG 105.72 We will accept relevant qualifications that are: (a) if still relevant, courses completed prior to 24 September 2012 as listed on the ASIC Training Register or current equivalent courses (see RG 105.84); or (b) approved under the Australian Qualifications Framework or self- accredited by a university or other institution of higher education (see RG 105.82–RG 105.83). Page 20 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 20 RG 105.73 Examples of qualifications that we will accept include the Diploma or Advanced Diploma of Financial Services (various providers) and the Diploma of Financial Markets (FINSIA), provided they are relevant to your responsible manager’s role. RG 105.74 We will not accept an individual assessment by an authorised assessor for the purposes of Option 2 as an industry-specific or product-specific diploma. Asset specialist qualifications for operating a registered scheme or CCIV RG 105.75 If you operate a registered scheme or operate the business and conduct the affairs of a CCIV, we will accept the qualifications in Table 2 as demonstrating under Option 4 that your responsible managers have appropriate knowledge for the type of assets under management. We will also accept other appropriate asset specialist qualifications. Note: You also need to have at least one responsible manager with knowledge and skills relevant to the legal and compliance obligations of the financial service: see RG 105.55. RG 105.76 You can also rely on any of the other options to demonstrate that your responsible managers have appropriate knowledge and skills—you do not have to rely on Option 4. Table 2: Examples of relevant asset specialist qualifications for operating a registered scheme or CCIV Kind of scheme or type of CCIV assets Qualification Financial assets Derivatives Mortgages IDPS-like schemes* IDPSs* Tertiary qualification (at least diploma) in business, accounting or actuarial studies Primary production Tertiary qualification (at least diploma) relevant to the underlying product (e.g. horticulture, viticulture, forestry) Direct real property Time-sharing schemes* Tertiary qualification (at least diploma) in real estate or property, or a real estate agent’s licence Note: Those items marked with an asterisk cannot be selected as asset types of sub-funds of CCIVs. RG 105.77 For a registered scheme or CCIV, your AFS licence authorisations will outline the kind of scheme that you can operate or the type of CCIV assets that you can hold. When applying for your licence, you must specify the dominant kind of scheme or type of CCIV assets. Page 21 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 21 Option 5: Other demonstration of knowledge and skills RG 105.78 If you do not rely on Options 1 to 4, you need to be able to satisfy us that your responsible manager has appropriate knowledge and skills for their role by providing us with a written submission. Your submission must explain: (a) the nature of your responsible manager’s role; (b) any relevant qualifications or courses they have completed; (c) their relevant experience over the past 10 years (this does not necessarily mean they need 10 years relevant experience); (d) any relevant credentials they have, including professional association membership or affiliation, or skills or knowledge recognised by an industry association, a regulatory body such as APRA, or some relevant overseas body; and (e) why you think they have appropriate knowledge and skills for the financial services and products their role relates to. RG 105.79 Whether or not we accept a responsible manager as having adequate knowledge and experience under Option 5 will depend on: (a) each applicant’s circumstances (based on the financial services or financial product authorisations sought); and (b) the knowledge and experience of the particular responsible manager relative to the authorisations the AFS licence applicant has sought. RG 105.80 Example 1–Example 3 below outline some situations in which we would consider that a responsible manager has appropriate knowledge and skills under Option 5. Example 4–Example 7 outline some situations in which we would not consider that a responsible manager has appropriate knowledge and skills. RG 105.81 These examples are meant to provide guidance and are not strict threshold requirements for a particular AFS licence applicant. This means that each case needs to be considered on its merits according to the relevant facts. Examples where we may accept responsible managers under Option 5 Example 1: Digital advice business Scenario An AFS licence applicant proposes to provide personal advice to wholesale and retail clients across a range of financial products through a digital advice business model. Note: Digital advice is the provision of automated financial product advice using algorithms and technology and without the direct involvement of a human adviser. The applicant nominates three responsible managers (RMs) to demonstrate its organisational competence. Page 22 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 22 RM1 has a Bachelor of Economics, Master of Business Administration and graduate diploma in applied finance and investment. RM1 has never provided financial advice to clients, but has six years experience at a senior level in a paraplanning division and supervised representatives providing financial planning advice to retail clients for one year. RM2 has worked at an AFS licensee and developed financial product offers to medium-to-large-sized organisations. RM2 has over six years of experience in financial product educational support services, development of investment mandates and portfolios, provision of client and custodial documentation, fund accounting and unit pricing. RM3 satisfies Option 4 because they hold a Master of Applied Finance from an Australian university and have 10 years experience in the investment management industry. Commentary While RM1 has insufficient experience in considering retail clients’ circumstances, the experience of RM2 and RM3 is relevant to the development of asset allocation alternatives. Taking into account the nature, scale and complexity of the applicant’s proposed business, ASIC would be prepared to accept the collective knowledge and experience of the three responsible managers for the purposes of granting the AFS licence authorisations sought. Example 2: Securities trading and advice via a mobile application Scenario An AFS licence applicant proposes to provide general advice to retail clients, and to deal in securities to facilitate clients trading in securities, via a mobile application. RM1 has a university degree in computer science, economics and international business. They have three years experience in advising on and dealing in securities, and have spent about two years developing the securities trading software. RM2 has a non-financial markets degree from a foreign university, with six years regulated experience advising on and dealing in securities in the United Kingdom over the past 10 years. RM2 has also worked for a securities adviser in Australia for one year. Both responsible managers have completed courses focused on educating responsible managers about Australian financial services laws and training that complies with RG 146 in providing advice to retail clients on securities. RM1 meets the requirements of Option 3. Commentary ASIC may be satisfied that RM2 has demonstrated sufficient relevant experience over the past 10 years under Option 5. Page 23 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 23 Example 3: Non-cash payment facility issuer and market maker in foreign exchange contracts Scenario An AFS licence applicant intends to provide online cross-border remittance services and make a market in foreign exchange contracts to retail and wholesale clients. RM1 has a Bachelor of Computer Science. RM1 has never provided financial services to clients directly, but has seven years experience in developing foreign exchange trading systems, foreign risk management and settlement systems, as well as supporting foreign settlement and trading for major banks. RM2 holds a Bachelor of Engineering. They have investment consulting experience in a foreign investment bank for more than three years, and a further six years experience in managing the proprietary portfolio of investment companies, involving deposit products and foreign exchange contracts. RM1 and RM2 have completed training that complies with RG 146 in deposit products, non-cash payment facilities and foreign exchange contracts. Commentary While RM1 has not directly provided financial services, their experience in the foreign exchange technology platform with major Australian banks would be considered relevant to the applicant’s proposed provision of financial services relating to automated foreign exchange remittance and making a market. RM2 does not have relevant qualifications so cannot be considered under either Option 3 or Option 4. However, the relevant financial services experience of RM2 in the advisory and dealing areas of the business complements RM1’s experience. Accordingly, we would be prepared to accept RM1 and RM2 under Option 5 because their collective knowledge and experience mean the business will have adequate organisational competence for the AFS licence authorisations sought. Examples where we may not accept responsible managers under Option 5 Example 4: Marketplace lending through securities Scenario An AFS licence applicant proposes to provide marketplace lending services to small-to-medium-sized enterprises funded by issuing securities. The sole nominated responsible manager has 10 years experience in regulatory affairs and compliance, and two years experience in providing general advice and dealing services to wholesale clients in relation to deposit products. Page 24 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 24 Commentary ASIC would not consider that this responsible manager has sufficient knowledge and skills under Option 5 because their experience is not relevant to the AFS licence authorisations being sought. The responsible manager’s advice and dealing experience does not relate to the applicant’s proposed business (i.e. the provision of advice and issue of securities associated with marketplace lending). Example 5: Unregistered scheme offered to wholesale clients Scenario An AFS licence applicant intends to operate an unregistered scheme offered to wholesale clients as a marketplace lender. We require the applicant to have: • a responsible manager with knowledge and experience in relation to operating a managed investment scheme; and • a responsible manager with knowledge and skills in relation to the type of assets under management (see RG 105.44). RM1 has eight years experience in commercial lending, credit and risk management. RM2 has two years experience in financial accounting and five years experience in business advisory services. Commentary ASIC would be satisfied that RM1 has demonstrated the required knowledge and skills in relation to the assets under management under Option 5. We would not consider that RM2 has demonstrated the required knowledge and skills under Option 5 for operating a managed investment scheme. We would not be satisfied that, when considered collectively, the responsible managers have the appropriate knowledge and skills for all of the AFS licence authorisations sought. Example 6: Marketplace lending through an unregistered scheme Scenario An AFS licence applicant proposes to provide marketplace lending services to small businesses through an unregistered scheme. RM1 seeks to be assessed under Option 5. RM1 has university degrees in mechanical engineering and computer science. RM1 also has over 10 years experience in corporate governance as a company director across multiple jurisdictions, with responsibility for capital raising and business development in the environmental, technology and financial sectors. RM 2 seeks to be assessed under Option 4. RM2 has an Advanced Diploma of Financial Services and a Certificate IV in Finance and Mortgage Broking, with over 10 years experience in funds management and five years experience in finance broking. Page 25 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 25 Commentary We would not consider that RM1 has demonstrated the necessary competence under Option 5. This is because RM1’s experience is not related to the financial services the AFS licence applicant wishes to provide or the financial products these services would relate to. However, we would be satisfied that RM2 has sufficient relevant knowledge and experience under Option 4. Example 7: Wholesale CCIV Scenario An AFS licence applicant intends to operate a wholesale CCIV that predominantly invests in securities. We require the applicant to have: • a responsible manager with knowledge and skill in relation to the financial services to be provided—that is, knowledge and skill in relation to operating the business and conducting the affairs of a CCIV; and • a responsible manager with knowledge and skills in relation to the type of assets under management—that is, financial assets (see RG 105.75). RM1 has five years’ experience in issuing and dealing in securities as a stockbroker both in Australia and abroad (including dealing in interests of the Undertakings for the Collective Investment in Transferable Securities in the United Kingdom). RM2 has five years in accounting consultancy services. Commentary ASIC would accept that RM1 has demonstrated the required knowledge and skills in relation to the assets under management under Option 5. We would also impose a key person condition on RM1, given the applicant’s reliance on RM1’s relevant asset expertise. We would not consider that RM1 and RM2 have, either individually or collectively, demonstrated the required competence (knowledge and skills) to operate a CCIV. We would accept the engagement of another responsible manager (RM3) as demonstrating appropriate organisational competence to be granted an authorisation to operate a CCIV. However, RM3 must have sufficient and relevant knowledge, and skills gained at other entities (such as a responsible entity, unregistered scheme trustee, corporate director or foreign equivalent of a CCIV). Explanations What is the Australian Qualifications Framework? RG 105.82 The Australian Qualifications Framework is a government initiative that provides a nationally consistent framework for all qualifications in post- compulsory education. For a qualification to be accepted under the Australian Qualifications Framework, it must be assessed as meeting certain standards. Page 26 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 26 RG 105.83 You can find qualifications that are accepted under the Australian Qualifications Framework by visiting www.aqf.edu.au. You can also go to this website to check which universities and other higher education institutions can self-accredit their own qualifications. What is the ASIC Training Register? RG 105.84 The ASIC Training Register is a register of training courses and authorised assessment services set up for our requirements for financial product advisers under RG 146. The ASIC Training Register is no longer current. For additional guidance see the ASIC Training Register page on the ASIC website. Note: The ASIC Training Register is valid up to 24 September 2012 and is currently under review. For courses completed after that date, you will need to contact individual training providers directly to get information about the courses they provide and if they meet the standards in RG 146. RG 105.85 The ASIC Training Register gives an indication of some training providers that may have continued (since 24 September 2012) to provide: (a) individual assessments (under Option 2); (b) a relevant short industry course; or (c) a relevant industry-specific or product-specific qualification. RG 105.86 Given the content is no longer current, you are not limited to the guidance for short courses and industry-specific or product-specific qualifications listed on the ASIC Training Register. However, you need to be able to demonstrate the relevance of the course to your responsible manager’s role. What if your responsible manager has overseas qualifications? RG 105.87 If your responsible manager has a relevant overseas qualification, you need to be able to show that the qualification is comparable to an Australian qualification that meets one of the five options. RG 105.88 If your responsible manager has a relevant overseas qualification from a foreign university or other higher education institution, you need to provide a submission setting out the responsible manager’s relevant overseas qualification and demonstrate: (a) the comparability of the overseas qualifications with Australian qualifications; and (b) how it is relevant to the option selected. RG 105.89 International Education Online provides official information and advice on the comparability of overseas qualifications with Australian qualifications. The Page 27 REGULATORY GUIDE 105: AFS licensing: Organisational competence © Australian Securities and Investments Commission June 2022 Page 27 International Education Online’s Country Education Profiles is an online recognition tool to assist in determining the equivalence of qualifications from more than 120 countries with Australian qualifications. Country Education Profiles (CEPs) can be purchased and access