Home › Forums › Australian Financial Services Licensing (AFSL) Forum › Is a "licensee a company" or the director / RM
December 13, 2017 at 6:01 pm #5195
Section 912A of the corps act outlines what a licensee must do. It says a licensee must: XYZ etc.
Is the licensee the company that holds the AFSL, and/or the director and/or the responsible manager?January 12, 2018 at 9:39 am #5216
The licensee is the entity (e.g. the company) that holds the AFSL and is thus responsible for complying with the s912A requirements.
‘Responsible Manager’ (RM) is not defined in the relevant legislation, nor are there any statutory duties or obligations attached to the position. The RMs are the people nominated by the Licensee to demonstrate its compliance with the 912A requirement to be competent. The RM will be an employee or contractor to the Licence holder, and their obligations are set out in their employment or sub-contract. Like other employees, they play a practical or functional role in carrying on and supervising the business of the Licensee.
The 912A obligations are not placed on the directors personally, but on the Licensee company of which they are directors. Directors have duties to act with due care and diligence and in the best interests of the company. If they conduct the licenced business in a way that is clearly not in the company’s best interests, they could be breaching their director’s duties. A recent example involved directors operating a financial advice business employing a business model that, the court found, was conflicted and not in the best interests of clients. This lead to a loss of the AFSL. Since the AFSL was necessary to the conduct of the business, and this was an outcome the board should have considered, the Court held that the directors had not exercised their duties with due care and skill, nor was in the best interests of the company.
Author: Grant Holley (Partner)
Co-contributor: Hugo Sasse (Law Clerk)