What Qualifications and Experience Must Australian Credit Licence Responsible Managers Have

Introduction

Meeting the stringent qualification and experience requirements is fundamental for individuals nominated as Responsible Managers (RM) for an Australian Credit Licence (ACL). These standards, enforced by the Australian Securities and Investments Commission (ASIC) under the National Consumer Credit Protection Act 2009 (Cth), are designed to ensure that ACL holders maintain the necessary organisational competence to engage in credit activities responsibly and effectively.

This guide will provide a detailed overview of the specific qualifications, such as relevant credit industry certifications like a Certificate IV or higher, and the minimum problem-free experience mandated for an ACL RM. Furthermore, it will address the critical importance for ACL applicants to be transparent about any past non-compliance issues of their nominated RMs, as this significantly influences ASIC’s assessment of their suitability and the overall licence application.

Understanding the Role of Responsible Managers for Australian Credit Licence Holders

What is a Responsible Manager under the Australian Credit Licence

A RM for an ACL is an individual nominated within a business who possesses the necessary knowledge and skills, as outlined in ASIC Regulatory Guide 206 (RG 206), to oversee the licensee’s credit operations. ASIC relies on the experience and qualifications of these RMs to evaluate and confirm the organisational competence of the business holding the ACL.

These individuals are central to the effective management of credit activities. The role of a RM involves:

• Direct participation in overseeing the provision of credit activities
• Making significant day-to-day decisions concerning the credit services offered by the business

Identifying suitable RMs is a critical step in the ACL application process. According to RG 206.3, ASIC assesses organisational competence by examining the qualifications and experience of these key individuals, who must meet a ‘fit and proper’ person test under the National Consumer Credit Protection Act 2009 (Cth).

When identifying RMs, businesses should focus on individuals primarily responsible for managing credit activities, rather than relying solely on job titles (RG 206.41). For instance, in a small business, the RM is typically the person ultimately responsible for daily decisions regarding the provision of credit activities.

Responsibilities and Organisational Competence Obligations for Responsible Managers

RMs play a crucial part in ensuring that an ACL holder meets its organisational competence obligations. This means the licensee must have individuals with the appropriate knowledge and skills to manage credit activities efficiently, honestly, and fairly, as stipulated by section 47(1)(a) of the National Consumer Credit Protection Act 2009 (Cth).

The National Consumer Credit Protection Act 2009 (Cth) places the responsibility on the licensee to maintain the competence to provide the credit activities authorised by its ACL (RG 206.5). Each RM nominated must be able to demonstrate this competence across all credit authorisations the business applies for, such as:

• Credit providing
• Credit assistance
• Debt management services

The specific actions required to comply with this obligation will vary depending on the nature, scale, and complexity of the business, including its size and the credit activities it undertakes (RG 206.6).

Minimum Qualifications Required for Responsible Managers under the ACL

Credit Industry Qualifications and General Higher-Level Qualifications

To meet the standards set by ASIC for an ACL, a RM must possess certain qualifications. These qualifications are crucial for demonstrating the necessary knowledge and skills to oversee credit activities.

According to ASIC’s RG 206, RMs are generally expected to hold either:

• A credit industry qualification to at least a Certificate IV level, or
• A general higher-level qualification

Examples of general higher-level qualifications that may be acceptable include:

• A diploma in fields such as Financial Services or Credit Management
• A university degree in relevant disciplines like economics, finance, or commerce

These qualifications ensure that the RM has a foundational understanding of the financial services landscape and the specific credit activities they will oversee. The choice between a specific credit industry qualification and a general higher-level one often depends on the nature and complexity of the credit activities the business intends to undertake.

Specific Qualification Requirements for Different Licence Types

The specific qualification requirements for a RM can vary depending on the type of ACL being sought. ASIC has outlined distinct expectations for different categories of credit activities to ensure appropriate expertise.

The required qualifications for different licence types include:

• Credit Provider: A RM typically needs a credit industry qualification to at least a Certificate IV level or a general higher-level qualification. For instance, a Certificate IV or Diploma in Financial Services or Credit Management, or a degree in economics, finance, or commerce would be appropriate.
• Credit Assistance Provider: Similar to credit providers, RMs in this category generally require a credit industry qualification to at least a Certificate IV level or a general higher-level qualification. Examples include a Certificate IV or Diploma in Financial Services or Finance and Mortgage Broking, or a degree in economics, finance, or commerce.
• Licensees that provide third-party home loan credit assistance: For this specific activity, ASIC mandates that RMs must hold a Certificate IV in Finance and Mortgage Broking, as stated in RG 206.8. This requirement underscores the specialised knowledge needed for home loan credit assistance.
• Debt Management: RMs overseeing debt management services are also expected to have a credit industry qualification to at least a Certificate IV level or a general higher-level qualification, such as a Certificate IV or Diploma in Financial Services or Credit Management, or a relevant university degree.

These tailored requirements ensure that RMs have the specific knowledge and skills relevant to the particular credit activities their licence authorises.

Recognition of Overseas Qualifications and Additional Training

ASIC may accept overseas qualifications for RMs, but certain conditions apply to ensure that these qualifications are comparable to Australian standards and that the RM understands the local regulatory environment. Generally, if a RM intends to rely on an overseas qualification, it should be relevant to the credit activities they will oversee.

However, it is important to note that overseas qualifications will not have covered Australian legal and regulatory requirements. Therefore, individuals with overseas qualifications will typically need to undertake additional training.

This supplementary training must cover specific Australian legislation, such as the National Consumer Credit Protection Act 2009 (Cth), relevant codes of conduct, and other Australian laws pertinent to their role. For instance, as outlined in RG 206.93, advisers with overseas qualifications should undertake suitable training to become familiar with Australian requirements.

An exception exists for those providing mortgage broking services; regardless of overseas qualifications, they must complete a Certificate IV in Finance and Mortgage Broking, as per RG 206.90.

Experience Requirements for Responsible Managers under the ACL

Minimum Relevant Problem-Free Experience of Two Years

To be appointed as a RM for an ACL, individuals must meet specific experience benchmarks set by ASIC. A fundamental requirement, as outlined in RG 206, is that a RM must possess at least two years of relevant, problem-free experience.

This experience must have been gained while engaging in credit activities under an existing ACL or as a credit representative. The emphasis on “problem-free” experience means that the individual’s track record should not be marred by significant compliance failures or regulatory actions.

Ideally, this two-year period of experience should occur within a licensed environment, ensuring the prospective RM has practical knowledge of operating within the regulatory framework. ASIC may request supporting documentation, such as references from previous supervisors in a credit business, to verify the nature and duration of the duties performed and to confirm that the experience was indeed problem-free.

Definition of Relevant Experience and Exclusions

ASIC clarifies that “relevant experience” for a RM must directly pertain to the specific credit activities that the ACL will authorise. For instance, if a licence application covers credit provision and credit assistance, the nominated RM should have experience in these particular areas.

The primary objective of this requirement is to ensure the RM has a thorough understanding of the processes and obligations involved in managing a business that undertakes those specific credit activities.

However, not all experience is considered relevant by ASIC. Experience is generally not recognised if it was:

• Gained in an unlicensed environment, meaning the person or their employer was providing credit services that required a licence but did not hold one.
• Obtained by providing exempt credit services, if this experience is not comparable to the experience that would have been gained in a regulated business offering similar credit services.

Assessment of Non-Compliance Issues in Experience

ASIC places significant importance on the compliance history of a potential RM. Any significant non-compliance issues within a RM’s past experience are closely scrutinised during the licence application process.

It is a critical obligation for ACL applicants to be transparent and disclose any such issues concerning their nominated RMs, as this information heavily influences ASIC’s assessment of their competence.

As detailed in RG 206, applicants must provide information about their RMs regarding various matters from the past 10 years that could indicate significant non-compliance. These include, but are not limited to:

• Any refusals, restrictions, or disciplinary actions related to authorisations required by law to carry on a trade, business, or profession.
• Involvement in the management of companies that have had a licence under the Corporations Act 2001 (Cth) (or previous corresponding laws) cancelled.
• Reprimands, disqualifications, or removals by professional or regulatory bodies concerning honesty, integrity, or business conduct.
• Adverse outcomes in administrative, civil, or criminal proceedings or enforcement actions in any country.
• Denial of accreditation by a credit provider, or cancellation or suspension of such accreditation for reasons other than volume.

When assessing non-compliance issues, ASIC will consider any mitigating circumstances and corrective actions taken by the RM. An isolated, trivial, or inadvertent non-compliance issue, particularly where immediate corrective action was taken, may not automatically disqualify a person.

However, a history demonstrating numerous instances of non-compliance will likely lead ASIC to determine that the individual is not competent to be a RM for an ACL.

ASIC’s Fit and Proper Person Test for Responsible Managers

Components of the Fit and Proper Person Test

For an individual to be appointed as a RM for an ACL, they must satisfy ASIC’s ‘fit and proper’ person test. This test is a cornerstone of the regulatory framework, ensuring that individuals overseeing credit activities possess the necessary personal attributes and legal standing.

The assessment of whether a person is ‘fit and proper’ involves a comprehensive evaluation of their character and capabilities. Key attributes that a prospective RM must demonstrate include:

• Good character, diligence, honesty, integrity, and judgement: These personal qualities are fundamental, as RMs are entrusted with significant decision-making and oversight within a credit business. ASIC needs to be confident that these individuals will act ethically and responsibly.
• Competence to undertake their role: This involves having the requisite knowledge and skills to effectively manage the specific credit activities authorised under the ACL.
• Not disqualified by law: The individual must not be legally barred from performing their role as a RM.
• Absence of unmanaged conflicts of interest: Any potential conflicts of interest must be identified, and if they exist, they must not create a material risk that the person will fail to properly perform their duties.

ASIC’s RG 206 outlines that the ‘fit and proper’ test applies to various individuals within an applicant’s business structure. This includes officers of a body corporate or partners in a partnership, from which RMs are typically drawn.

Moreover, the obligation to ensure these individuals remain fit and proper continues throughout the term of the ACL.

Background Checks and Documentation Required

To verify that a nominated RM meets the ‘fit and proper’ person criteria, ASIC requires several background checks and supporting documents. These checks provide objective information about the individual’s history and standing.

Licensees are expected to conduct their own due diligence and maintain records of these checks. The essential checks and documentation include:

• Police Checks: A national criminal history check must be provided for each RM. This check must be current, generally dated within the last 12 months prior to the licence application.
• Bankruptcy Checks: Similarly, a current bankruptcy check (dated within the last 12 months) is required to ensure the individual is not an undischarged bankrupt or subject to personal insolvency agreements that might compromise their suitability. ASIC often conducts its own internal bankruptcy checks as well.
• Business References: Typically, at least two business references are needed to attest to the RM’s experience, character, and competency in relation to credit activities. These references should ideally come from previous supervisors or individuals who can speak to their professional conduct in a relevant business.
• ASIC’s Statement of Personal Information: Nominated RMs must complete and submit ASIC’s statement of personal information form. This form includes a series of questions designed to gather information relevant to assessing their fitness and propriety.

These documentary requirements help ASIC build a comprehensive profile of each RM, contributing to the overall assessment of the applicant’s organisational competence for the ACL.

Factors That May Affect Fit and Proper Status

Several factors relating to a nominated RM’s past conduct and history can raise concerns for ASIC and potentially affect their assessment as a ‘fit and proper’ person. Transparency regarding these issues is crucial during the licence application process, as outlined in RG 206.

ASIC may have concerns if a nominated RM has a history that includes:

• Past licence suspensions or cancellations: If the individual has previously had an Australian Financial Services Licence (AFSL) or an ACL suspended or cancelled.
• Banning or disqualification orders: If a court or regulatory body has issued a banning or disqualification order against the individual, preventing them from managing corporations or engaging in credit activities under State or Territory law.
• Convictions for offences: Any convictions for offences, particularly those relating to honesty, fraud, or financial management, within the last 10 years are significant.
• Links to AFCA determinations: A history of being linked to a refusal or failure to give effect to a determination made by the Australian Financial Complaints Authority (AFCA).
• Disciplinary actions: Any disciplinary actions by professional or regulatory bodies concerning the person’s honesty, integrity, or business conduct.
• Refusals or restrictions on authorisations: If the individual has faced refusals or restrictions in relation to carrying on a trade, business, or profession that requires an authorisation by law.
• Denial or cancellation of accreditation: If they have been denied accreditation by a credit provider, or had accreditation cancelled or suspended for reasons other than volume.

While an isolated, minor, or inadvertent non-compliance issue where corrective action was promptly taken may not automatically disqualify an individual, a pattern of such issues will likely lead ASIC to question their fitness to be a RM.

Continuing Professional Development and Ongoing Competence for Responsible Managers

CPD Requirements for Responsible Managers

RMs for an ACL must maintain and enhance their knowledge and skills through ongoing professional development. RG 206 stipulates that RMs should undertake at least 20 hours of continuing professional development (CPD) per year. This requirement is typically set out as a condition on the ACL.

Licensees must keep records of the CPD activities their RMs complete. The CPD undertaken should be relevant to their role and cover a range of areas to ensure ongoing competence, including:

• Developments in the credit industry
• Knowledge about credit products
• Crucial compliance training, such as understanding the responsible lending obligations under the National Consumer Credit Protection Act 2009 (Cth)

Acceptable CPD activities can include:

• Attending relevant professional seminars or conferences
• Time spent preparing for and presenting at such events
• Publishing articles in journals relevant to the credit industry
• Viewing videos of recent professional seminars or conferences (up to a maximum of 10 hours annually)
• Completing online tutorials or quizzes on recent regulatory, technical, or professional developments
• Internal training on systems, procedures, and policies pertinent to the RM’s role, though this should not form the majority of CPD hours

Maintaining Organisational Competence through Regular Reviews

To ensure ongoing compliance with the organisational competence obligation, ACL holders must implement measures to regularly review their capabilities. These reviews should assess whether the licensee continues to have the necessary knowledge and skills, particularly when there are changes to its RMs or business activities.

For instance, before expanding the range of credit activities or replacing a key RM, a review of organisational competence is essential. It is crucial for licensees to document these reviews and any steps taken to maintain or enhance organisational competence.

Keeping thorough records of how qualifications and experience of RMs are maintained and updated demonstrates a commitment to compliance. Such documentation is vital, as it helps to show ASIC that the licensee is meeting its obligations under the ACL framework.

Succession Planning and Responsible Manager Registers

A key aspect of maintaining organisational competence for an ACL involves robust succession planning for RMs. This is particularly important if the business heavily relies on the expertise of one or two individuals, a situation that might lead ASIC to impose a ‘key person licence condition’. A well-thought-out succession plan ensures that the business can continue to meet its obligations without disruption if a RM departs.

Furthermore, maintaining a comprehensive register of RMs is a valuable practice for ACL holders. This register should detail:

• Each RM’s specific knowledge, skills, and experience
• The particular financial services and products they are responsible for overseeing

Such a register assists in the regular review of organisational competence and provides clear documentation to support ongoing compliance with ASIC’s requirements.

Additional Requirements and Restrictions for Responsible Managers

Limitations on Associations with Other Credit Licences

A RM for an ACL generally should not be associated with more than one other Credit Licence. This limitation extends to various roles such as:

• Being a RM for another credit licensee
• Serving as a director in another credit licensee
• Acting as a shareholder in another credit licensee

The primary reasons for this restriction are to avoid potential conflicts of interest and to ensure the RM has sufficient capacity to dedicate to their duties for each licence.

ASIC carefully scrutinises such associations to ensure that a RM can adequately oversee credit activities and make significant day-to-day decisions without being overextended. Multiple commitments could potentially compromise compliance and the quality of financial services provided by impacting their ability to properly manage the responsibilities associated with an ACL.

Documentation of Responsible Manager Arrangements

It is crucial for ACL holders to formally document the arrangements with their RMs. This formalisation helps to clearly define the roles, responsibilities, and expectations of the RM within the business.

These arrangements should be documented through:

• An employment contract, if the RM is an employee of the licensee
• A Responsible Manager Agreement, particularly if the RM is engaged as a contractor or in another capacity

Proper documentation ensures that both the licensee and the RM have a clear understanding of the scope of the role. This clarity is essential for maintaining organisational competence and meeting ASIC’s requirements for the ACL. Additionally, it provides a clear framework for the RM’s authority and obligations in both the licence application process and ongoing operations.

Compliance Considerations for Businesses with Australian Credit Licences

Transparency About Past Non-Compliance Issues of Responsible Managers

ACL applicants must fully disclose any significant past non-compliance issues related to their nominated RMs. This transparency is vital as such information heavily influences how ASIC assesses the competence and suitability of a RM for an ACL.

ASIC requires comprehensive details regarding various matters from the past 10 years for each RM, which could indicate significant non-compliance. These matters include:

• Any refusals, restrictions, or disciplinary actions concerning authorisations legally required to conduct a trade, business, or profession, providing context on the RM’s regulatory history
• Involvement in the management of companies that have had a licence under the Corporations Act 2001 (Cth) (or previous corresponding laws) cancelled, which may indicate past governance issues
• Instances of being reprimanded, disqualified, or removed by professional or regulatory bodies in relation to honesty, integrity, or business conduct, reflecting on their character
• Adverse determinations in administrative, civil, or criminal proceedings or enforcement actions undertaken in any country, which are critical for assessing their overall compliance record
• Denial of accreditation by a credit provider, or the cancellation or suspension of such accreditation for reasons unrelated to business volume, potentially indicating issues with professional conduct or competence

While ASIC will consider any mitigating circumstances and corrective actions taken by the RM, a history demonstrating numerous non-compliance issues will likely lead ASIC to conclude that the individual is not competent to act as a RM for an ACL.

Monitoring Changes in Responsible Managers and Business Activities

Businesses holding an ACL must diligently and regularly review their organisational competence to ensure ongoing compliance. This review becomes especially crucial when there are changes to their RMs or the nature and scope of their business activities.

Such reviews help ensure that the licensee continues to possess the necessary knowledge and skills to manage its credit operations effectively, honestly, and fairly, as required by ASIC. Additionally, licensees should have documented measures for conducting these reviews and maintaining records of them, as outlined in RG 206.

For example, before a business expands its range of credit activities or replaces a key RM, a comprehensive review of its organisational competence is essential to ensure it can still meet its ACL obligations. This proactive approach helps maintain the integrity of the licence.

It is also important for the licensee to notify ASIC of significant changes, such as changes to key RMs, within the stipulated timeframes to demonstrate continuous adherence to the licence conditions.

Managing Key Person Licence Conditions

ASIC has the authority to impose a ‘key person licence condition’ on an ACL. This typically occurs if ASIC determines that the licensee’s organisational competence is heavily reliant on the specific knowledge and skills of one or two particular RMs, as detailed in RG 206.48.

This licence condition explicitly names these key RMs. Consequently, if any of these named individuals depart or their role within the business changes significantly, the licensee must promptly identify suitable replacements. The business must then demonstrate to ASIC that it continues to possess the required organisational competence to provide its credit activities under the ACL.

Failure to adequately manage the departure of a key person RM, including not finding a suitable and timely replacement, can place the ACL at serious risk, potentially leading to:

• Suspension of the licence
• Possible cancellation by ASIC

Therefore, businesses that have or might face a key person condition should implement robust contingency and succession plans for their RMs. Effective planning includes:

• Developing a clear succession strategy, particularly for any RM whose expertise is critical for specific credit products or services offered under the licence
• Establishing procedures to swiftly identify, vet, and nominate a new RM should a key individual leave, ensuring minimal disruption to compliant operations
• Maintaining a thorough understanding of ASIC’s notification requirements and the process for demonstrating ongoing organisational competence after such a change to the RM team

Conclusion

Becoming a RM for an ACL requires meeting specific qualifications, such as relevant credit industry certifications like a Certificate IV or higher, gaining at least two years of problem-free relevant experience, and passing ASIC’s fit and proper person test. Furthermore, ongoing compliance, including CPD and transparent disclosure of any past non-compliance issues, is crucial for both the RM and the ACL holder.

Navigating the complexities of these requirements for your ACL can be challenging. Our trusted ACL lawyers‘ expertise and specialised assistance will ensure your nominated RMs meet all ASIC criteria and maintain ongoing compliance. Contact AFSL House today to secure your licence and operate with confidence.

Frequently Asked Questions About Qualifications and Experience for ACL Responsible Managers