Responsible Manager and Compliance Officer Training Prepared by MSM Compliance Services P/L

Who Are MSM Compliance? MSM is a national professional services business focused on the general insurance industry. Your company has engaged MSM to assist in the management of its obligations as a holder of an Australian Financial Services Licence. MSM helps to ensure that you and your company comply with your AFS Licence obligations with the least disruption to your core business.

What Are We Going To Cover ? Business Management Responsible Managers (RM’s) The concept The legislation ASIC’s expectations The reality in a small/medium AFS Licensee Compliance Officers (CO’s) What is compliance The role of the CO

The Management Role No different to business in general Management co-ordinates the activities of others Includes moral and ethical questions Identifying and quantifying the business goals to strive for

Management Functions Licensing obligations Developing financial services Financial Management Managing human resources Marketing the business Monitoring and reviewing service performance

Licensing Obligations Comply with Corporations Act 2001 (The Act) Comply with Licence conditions RG104 & 105 – Organisation & Management RG126 – Compensation Arrangements RG146 – Training for advisers RG165 - Dispute systems RG166 – Financial and Cash Flow RG168 - Disclosure RG175 – Adviser advice, conduct and disclosure RG181 – Conflicts of Interest

Responsible Manager Obligations Directly responsible for the day-to-day business decisions about the ongoing provision of financial services. Is of good fame and character. Has necessary qualifications and experience. Completes ongoing training to keep up to date.

Developing Financial Services Develop and maintain a Business Plan and Financial Budget Implement quality controls and document procedures Define product and service deliverables Allocate responsibility Ensure consistency with RG 104 & RG 105

Financial Management Ensure business is financially viable Maintain annual budgets with monthly breakdown Compare actual to budget Ensure consistency with RG166 Lodge annual accounts Handle client money as required by The Act

Human Resources Enough staff to provide services fairly and efficiently. Comprehensive staff selection and induction system. Training as per RG146 Monitor outcomes and performance

Marketing The Business Identifying target client base Create profile with suppliers Develop unique sales proposition (Service Standards / Agreements) Develop and implement sales and advertising plans Allocate development responsibilities

Monitoring & Reviewing Service Performance Performance Vs Commmitment or Plan Policy/Renewal Rates Client feedback including no. of complaints Cost and profitability of clients Debtor control

Responsible Managers - Why Have Them? Required as part of Licensing Process The people ASIC rely on when deciding to issue/maintain an AFS Licence. Control the business day to day. A separate concept to Boards/Directors The people your staff go to for decision making

Responsible Managers - The Law Only 2 references in The Act Penalties generally apply to the Licensee (Directors), not the Responsible Manager. Responsible Manager’s position is the same as an officer of a company.

Responsible Managers - ASIC’s Approach ASIC have clear expectations of Responsible Managers Mentioned throughout all of the Policy Statements “People you rely on to meet organisational competencies” ASIC can have Responsible Managers removed or banned ASIC can name you in publicity

Responsible Managers - ASIC’s Approach “directly responsible for significant day to day business decisions” to be actively involved in one or more of: Management / Service delivery Control / Planning Monitoring / Supervision Individual responsibility or part of a team.

Don’t Be A “Norm” - Get Involved Get involved in your AFS Licence obligations Share the workload and the learning Become involved / responsible for an area/function/process/product. Seek business/compliance/specialist training Identify areas where you complement the skills of others.

Responsible Managers - Practical Tips Sole RM’s - look for a relieving option. 20 - 30 hours training - management / business focussed Involve all RM’s in the annual business planning process Succession planning - a new step

Responsible Managers Delegate and understand AFS Licence tasks Training Officer Risk Management Finances Compliance Information Technology Conflict of Interest Policy and Procedures Staff communication and meetings

Key Processes Once Licenced Implement FSG / SOA / PDS processes Set up Trust Account Set up Trust Account management processes Make sure Compliance Officer is active and effective

ASIC’s Expectations Documentation system Responsible Manager Provided by MSM FSRA Mission Control Responsible Manager Development program (Training Plan) Compliance Compliance Checking System Compliance Breach Register Complaints Complaints Register FOS membership

ASIC’s Expectations Representatives Financial Induction process Training Plans Documentation – RG146, Police & Bankruptcy Checks Financial Cash Flow Monitoring RG166 Worksheets

ASIC’s Expectations Compensation Operational Current Professional Indemnity Cover Operational Up to date Organisation Chart Business Plan Trust Account Systems Approved Product List (if applicable)

Compliance - Why A specific requirement under RG104 & 105 A specific question on the AFS Licence Application Form Target is Australian Standards AS3806 - 1998 It makes good business sense It is your safetynet!

Compliance Concept Aim to prevent, identify and respond to problems Promote a culture (do the right thing) Help the business be a good citizen Produce consistent outcomes (Ensure Licence retention)

Compliance Officer Diligent and experienced person Can be an external person or contractor Must have full access to business and staff (do not keep it a secret) Must report to Board or Managing Director Get them to read about compliance

Steps To Compliance Success For CO Read your Compliance documentation Review your licence application on compliance. Note what you should be doing and when. Organise yourself and do it. If you don’t have a checklist and a timetable seek help!

Compliance Officer Roles Complete checklists/tasks as required Document work, complete Breach Register Advise ASIC of significant breaches Promote / Reward “Compliance Culture” Keep up to date with ASIC/Industry feedback

Changes In Compliance Process Increase checking frequency/scope in problem or high risk areas. Reduce checking frequency/scope in areas with no problems. Discuss with RM’s Document change decision - in a logical place Communicate to staff.

What Kills Compliance CO not experienced/senior enough for role. Failure of RM’s or CO to lead by example. Failure by RM’s to support CO in process. Failure of RM’s to fix issues identified. Viewing Compliance as a negative rather than as a positive. “Bagging” staff due to compliance issues

Compliance Risk Increases When ? There is a change in: Staff / Staff roles / Staff Structure Technology Office Policies and Procedures Legislative requirements

Compliance Improves With Completing a simple program rather than fiddling with a complicated one. An organised approach - Internet/Microsoft Outlook/Diary. Discussions with your peers Use of regular external reviews.

The End RM’s - get involved and understand the business RM’s - Business Planning - a key process CO’s - Use your checklists CO’s - Push the RM’s to rectify problems