Credit licensees need to be aware of their organisational competence obligations when a “key person” leaves the business and the potential impact of this.
ASIC has recently cancelled the Australian credit licence held by South Australian mortgage broking company Vontelle Pty Ltd. The licence was cancelled as a result of the broker failing to comply with the organisational competence obligation imposed under its licence. In particular, ASIC was concerned that:
- the "key person" listed on Vontelle’s credit licence had ceased to be an officer of Vontelle and had not performed duties for the broker; and
- Vontelle had failed to notify ASIC that the "key person" had ceased to be involved in the business, nor had it applied to vary this condition of its licence.
When will ASIC impose a “key person” condition?
A “key person” condition may be imposed on your credit licence if ASIC considers you to be heavily dependent on the expertise of a small number of people to be competent to engage in credit activities.
If you are subject to a "key person" condition you will be required to notify ASIC if any of your key people leave, or are about to leave, the business. In addition, if a “key person” leaves your business, you will need to apply to vary the “key person” condition of your licence. As part of this variation application, you will be required to:
- demonstrate to ASIC that your remaining Responsible Managers have sufficient knowledge and skills to replace the key person; or
- if you only have one Responsible Manager, nominate a replacement Responsible Manager, with sufficient knowledge and skills, to be your “key person”.
ASIC’s decision to cancel Vontelle’s credit licence for failure to comply with its organisational competence obligation (in particular, the “key person” condition) is a reminder to all credit licensees about the importance of:
- understanding and complying with any “key person” condition of your licence when a “key person” leaves your business; and
- having adequate business succession plans in place to avoid being left without a “key person”.