Responsible Manager and Compliance Officer Training

1. Responsible Manager and Compliance OfficerTraining Prepared by MSM Compliance Services P/L

2. 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.

3. 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

4. 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

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

6. 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

7. 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.

8. 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

9. 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

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

11. 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

12. 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

13. 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

14. 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.

15. 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

16. 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.

17. 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.

18. 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

19. 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

20. 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

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

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

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

24. 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!

25. 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)

26. 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

27. 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!

28. 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

29. 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.

30. 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

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

32. 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.

33. 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